<PAGE>
As filed with the Securities and Exchange Commission on December 8, 2000
1933 Act Registration No. 333-___
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_] Pre-Effective Amendment No. ____ [_] Post-Effective Amendment No.______
PAINEWEBBER PACE SELECT ADVISORS TRUST
(Exact name of registrant as specified in charter)
51 West 52nd Street
New York, New York 10019-6114
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000
AMY R. DOBERMAN, ESQ.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas, 18th Floor
New York, New York 10019
(Name and address of agent for service)
Copies to:
JON S. RAND, ESQ. ARTHUR J. BROWN, ESQ.
Willkie Farr & Gallagher Kirkpatrick & Lockhart LLP
787 Seventh Avenue 1800 Massachusetts Avenue, N.W., 2/nd/ Floor
New York, New York 10019-6099 Washington D.C. 20036
Telephone: (212) 821-8256 Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: as soon as practicable after this
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on the 30th day after
filing pursuant to Rule 488.
Title of securities being registered: Class A, Class B, Class C and Class Y
shares of beneficial interest in the series of the Registrant designated PACE
International Emerging Markets Equity Investments.
No filing fee is due because the Registrant is relying on Section 24(f) of the
Investment Company Act of 1940, as amended, pursuant to which it has previously
registered an indefinite number of securities.
<PAGE>
PAINEWEBBER ASIA PACIFIC GROWTH FUND
(A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
December [ ], 2000
Dear Shareholder:
The enclosed proxy statement and prospectus asks for your vote on a
proposal that will determine the future of PaineWebber Asia Pacific Growth
Fund.
We are seeking shareholder approval to merge Asia Pacific Growth Fund into
PACE International Emerging Markets Equity Investments ("PACE Fund"). If the
merger is approved, you will receive shares of the corresponding class of
shares of the PACE Fund in exchange for your Asia Pacific Growth Fund shares,
and Asia Pacific Growth Fund will cease operations. The expenses of each class
of shares of the PACE Fund following the merger would be lower than the
current expenses of the corresponding class of Asia Pacific Growth Fund.
Mitchell Hutchins is the investment manager for both Funds and has retained
Schroder Investment Management North America Inc., an unaffiliated firm, to
manage each Fund's assets. Although the two Funds have similar investment
objectives in that each Fund seeks capital appreciation, they have different
investment policies. Asia Pacific Growth Fund invests primarily in stocks of
companies in the Asia Pacific Region (except Japan), including stocks of
companies in both developed and emerging market countries within that region.
PACE International Emerging Markets Equity Fund invests primarily in stocks of
companies in emerging market countries and is not limited to any one
geographic region.
The enclosed document describes the proposed merger more fully and compares
the investment strategies and policies, risk characteristics, operating
expenses and performance histories of the two Funds in more detail. Please
read this document carefully. We have included a "Question and Answer" section
that we believe will be helpful to most investors.
YOUR VOTE IS VERY IMPORTANT. After reviewing the enclosed document, please
complete, date and sign your proxy card and return it TODAY in the enclosed
postage-paid return envelope. Or you may vote your shares by telephone or the
internet. Voting your shares early will avoid costly follow-up mail and
telephone solicitation.
THE BOARD UNANIMOUSLY URGES THAT YOU VOTE "FOR" THE PROPOSED MERGER.
Sincerely,
Brian M. Storms
President
<PAGE>
PAINEWEBBER ASIA PACIFIC GROWTH FUND PROPOSED MERGER
QUESTIONS AND ANSWERS
On October 6, 2000, the Board of Trustees of PaineWebber Managed
Investments Trust ("Managed Investments Trust"), on behalf of its series,
PaineWebber Asia Pacific Growth Fund ("Asia Pacific Growth Fund"), unanimously
approved the merger of Asia Pacific Growth Fund into PaineWebber PACE
International Emerging Markets Equity Investments ("PACE International
Emerging Markets Equity Fund"), a series of PaineWebber PACE Select Advisors
Trust ("PACE Trust"). This merger, however, can only occur if Asia Pacific
Growth Fund's shareholders approve the transaction. Here are answers to some
of the most commonly asked questions.
WHAT IS A MERGER?
A fund is said to merge with another fund when it transfers its assets and
liabilities to that other fund; subsequently, the old fund ceases to operate.
Shareholders of the old fund become shareholders of the acquiring fund.
WHY IS THIS MERGER BEING PROPOSED?
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") and the Board
of Managed Investments Trust believe that Asia Pacific Growth Fund's most
attractive and significant feature is its investment in stocks of companies in
emerging market countries and that the Fund's shareholders will benefit from
the merger because the combined Fund would have a larger asset base to invest
in stocks of companies in emerging market countries and would have lower
expenses. If the proposed merger does not occur, Mitchell Hutchins and the
Board believe that Asia Pacific Growth Fund's small and declining asset base
may make it increasingly difficult to manage efficiently and could adversely
affect the Fund's prospects for successful performance over the long term.
Asia Pacific Growth Fund started operations in March 1997, but its assets
never exceeded $ and have been relatively flat or declining over the past
[ ] months. As of November 30, 2000, the Fund's net assets were approximately
$ million. As a result of this relatively low and declining asset level,
the Fund has been difficult to manage efficiently and its expenses have
remained relatively high. Asia Pacific Growth Fund and PACE International
Emerging Markets Equity Fund have similar investment objectives in that each
Fund seeks capital appreciation, and each Fund's assets have been managed
since its inception by the same sub-adviser, Schroder Investment Management
North America Inc. ("SIMNA"), a firm that is not affiliated with Mitchell
Hutchins. While both Funds invest in stocks of companies in emerging market
countries, they do so to different extents and subject to different
geographical parameters. PACE International Emerging Markets Equity Fund
invests primarily in stocks of companies in emerging market countries and is
not limited to any one geographic region. Asia Pacific Growth Fund invests
primarily in stocks of companies in the Asia Pacific Region (other than
Japan), including stocks of companies in both developed and emerging market
countries within that region. Although the universe of potential investments
is thus different for the two Funds, SIMNA applies the same basic strategies
in deciding which stocks to buy or sell for the two Funds. (See "Comparison of
the Funds" on page [ ] of the Combined Proxy Statement/Prospectus for more
information on the investment policies and risks of each Fund.)
Mitchell Hutchins and Managed Investments Trust's Board believe that the
merger would not materially adversely affect the shareholders of Asia Pacific
Growth Fund notwithstanding the differences in the two Funds' investment
policies. The combined Fund would invest primarily in stocks of companies in
emerging market countries, which the Board and Mitchell Hutchins believe is
Asia Pacific Growth Fund's most attractive and significant feature for its
shareholders, and would have lower operating expenses.
1
<PAGE>
HOW MANY SHARES WILL I RECEIVE AT THE TIME OF THE MERGER?
If the merger is approved, you will receive full and fractional shares of
the corresponding class of PACE International Emerging Markets Equity Fund
having a total value equal to the total value of your Asia Pacific Growth Fund
shares at the time of the merger. Although the two Funds will have different
net asset values per share, each class of shares of PACE International
Emerging Markets Equity Fund issued in the merger will otherwise have
characteristics that are substantially identical to the corresponding class of
shares of Asia Pacific Growth Fund.
IF I CURRENTLY ELECT TO RECEIVE MY ASIA PACIFIC GROWTH FUND DIVIDEND AS CASH
OR IF I HAVE THE DIVIDEND AUTOMATICALLY REINVESTED INTO THE FUND, WILL MY
DISTRIBUTION CHOICE REMAIN THE SAME FOR MY PACE INTERNATIONAL EMERGING MARKETS
EQUITY FUND SHARES AFTER THE MERGER?
Yes, your distribution choice will remain the same after the merger.
WILL I HAVE TO PAY TAXES AS A RESULT OF THE MERGER?
The merger has been structured as a tax-free transaction, which means that
no gain or loss will be recognized by either Fund as a direct result of the
merger. This means that you will not realize any gain or loss on your receipt
of PACE International Emerging Markets Equity Fund shares, and that your basis
for the PACE International Emerging Markets Equity Fund shares you receive in
the merger will be the same as the basis for your Asia Pacific Growth Fund
shares.
Immediately prior to the merger, Asia Pacific Growth Fund will have to
distribute all of its previously undistributed income and net capital gain, if
any, to its shareholders, and that distribution will be taxable to Asia
Pacific Growth Fund shareholders. You should note, however, that both Funds
expect to distribute their ordinary income for the calendar year and net gain,
if any, for the one year period ending October 31, 2000. This distribution
will be made regardless of whether the merger takes place because of the tax
requirements applicable to all mutual funds. This means that if you remain a
shareholder of Asia Pacific Growth Fund, if the merger takes place, you may
receive two distributions of ordinary income and net capital gain, if any,
within a short period of time.
HOW WILL THE MERGER AFFECT FUND EXPENSES?
The post-merger combined Fund is expected to have overall operating
expenses that are lower than the current operating expenses of Asia Pacific
Growth Fund due to economies of scale and a lower management fee paid by PACE
International Emerging Markets Equity Fund to Mitchell Hutchins. The overall
operating expenses of PACE International Emerging Markets Equity Fund are also
subject to a written management fee waiver and expense reimbursement agreement
between the Fund and Mitchell Hutchins, which will remain in effect through
December 1, 2002. Even absent that agreement, however, it is expected that the
overall operating expenses of the combined Fund would be lower than the
current operating expenses of Asia Pacific Growth Fund. (For more details
about fees and expenses of each class of shares, see "Comparative Fee Table"
on page [ ] of the Combined Proxy Statement/Prospectus.)
HOW HAVE PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND AND ASIA PACIFIC
GROWTH FUND PERFORMED?
The following tables show the average annual total returns over several
time periods for each class of shares of Asia Pacific Growth Fund and the
Class P shares of PACE International Emerging Markets Equity Fund (the only
outstanding class of shares during the periods shown). A Fund's past
performance does not necessarily indicate how it will perform in the future.
The table for Asia Pacific Growth Fund reflects sales charges on its Class A,
B and C shares and the higher expenses for these classes due to the fees paid
under their Rule 12b-1 plans. The table for PACE International Emerging
Markets Equity Fund does not reflect the maximum PaineWebber PACESM Select
Advisors Program fee of 1.50% (which does not apply to shares received in the
2
<PAGE>
merger). The Class Y shares of Asia Pacific Growth Fund and the Class P shares
of PACE International Emerging Markets Equity Fund are not subject to any
sales charges or 12b-1 fees. The tables also compare each Fund's returns to
returns of a broad-based market index. The comparative indices, which are
different for the two Funds, are unmanaged and, therefore, do not reflect the
deduction of any sales charges or expenses.
PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)
<TABLE>
<CAPTION>
CLASS CLASS P MSCI EMERGING
(INCEPTION DATE) (8/24/95) MARKETS FREE INDEX
---------------- --------- ------------------
<S> <C> <C>
One Year........................................... 61.85% 66.41%
Life of Class...................................... 5.08% 3.14%
</TABLE>
ASIA PACIFIC GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)
<TABLE>
<CAPTION>
MSCI ALL COUNTRY ASIA
CLASS CLASS A CLASS B CLASS C CLASS Y PACIFIC FREE
(INCEPTION DATE) (3/25/97) (3/25/97) (3/25/97) (3/13/98) (EX-JAPAN) INDEX
---------------- --------- --------- --------- --------- ---------------------
<S> <C> <C> <C> <C> <C>
One Year......... 59.90 % 60.97 % 65.11 % 67.72% 55.23%
Life of Class.... (2.51)% (2.68)% (1.58)% 20.68% *
</TABLE>
----------------
* Average annual total returns for the MSCI All Country Asia Pacific Free (ex-
Japan) Index for the life of each class were as follows: Class A, Class B
and Class C -- 0.37%, respectively, and Class Y -- 16.78%.
WHEN WILL THE PROPOSED MERGER OCCUR?
The Funds expect to merge in February 2001, assuming Asia Pacific Growth
Fund shareholder approval at the special meeting scheduled to be held on
January 25, 2001.
CAN I SELL OR EXCHANGE MY ASIA PACIFIC GROWTH FUND SHARES BEFORE THE MERGER?
If you do not wish to receive shares of PACE International Emerging Markets
Equity Fund, you are free to sell or exchange your Asia Pacific Growth Fund
shares at any time prior to the merger. You will be subject to any applicable
contingent deferred sales charges and taxes if you sell your Asia Pacific
Growth Fund shares. If you elect to exchange your shares prior to the merger,
you may be subject to taxes. Consult your tax adviser for the tax implications
of an exchange. Please call your Financial Advisor to discuss your investment
options or with any questions.
WHAT IS THE BOARD'S RECOMMENDATION ON THE MERGER?
Your Board of Trustees unanimously recommends a vote "FOR" the merger.
3
<PAGE>
PAINEWEBBER ASIA PACIFIC GROWTH FUND
(A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JANUARY 25, 2001
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders ("Meeting")
of PaineWebber Asia Pacific Growth Fund ("Asia Pacific Growth Fund"), a series
of PaineWebber Managed Investments Trust ("Managed Investments Trust"), will
be held on January 25, 2001, at 1285 Avenue of the Americas, 14th Floor, New
York, New York, 10019-6028, at [ ], Eastern time, for the following purpose:
To approve or disapprove the Agreement and Plan of Reorganization and
Termination ("Plan") that provides for the reorganization of Asia
Pacific Growth Fund into PaineWebber PACE International Emerging
Markets Equity Investments ("PACE International Emerging Markets Equity
Fund"), a series of PaineWebber PACE Select Advisors Trust ("PACE
Trust"). Pursuant to the Plan, Asia Pacific Growth Fund will transfer
all its assets to PACE International Emerging Markets Equity Fund,
which will assume all the stated liabilities of Asia Pacific Growth
Fund, and PACE Trust will issue to each Asia Pacific Growth Fund
shareholder the number of full and fractional shares of the applicable
class of PACE International Emerging Markets Equity Fund having an
aggregate net asset value that, on the effective date of the
reorganization, is equal to the aggregate net asset value of the
shareholder's shares in Asia Pacific Growth Fund.
Shareholders of record as of the close of business on November 21, 2000,
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
Please execute and return promptly in the enclosed envelope the
accompanying proxy, which is being solicited by the Board of Trustees of
Managed Investments Trust, or vote your shares by telephone or the internet.
Returning your proxy promptly is important to ensure a quorum at the Meeting.
You may revoke your proxy at any time before it is exercised by the subsequent
execution and submission of a revised proxy, by giving written notice of
revocation to Managed Investments Trust at any time before the proxy is
exercised or by voting in person at the Meeting.
By Order of the Board of Trustees,
Dianne E. O'Donnell
Secretary
December [ ], 2000
51 West 52nd Street
New York, New York 10019-6114
<PAGE>
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
Please indicate your voting instructions on the enclosed proxy card, sign
and date the card and return it in the envelope provided. IF YOU SIGN, DATE
AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL
BE VOTED "FOR" THE PROPOSAL DESCRIBED ABOVE. In order to avoid the
additional expense of further solicitation, we ask your cooperation in
mailing your proxy card promptly. As an alternative to using the paper proxy
card to vote, you may vote shares that are registered in your name, as well
as shares held in "street name" through a broker, via the internet or
telephone. To vote in this manner, you will need the 14-digit "control"
number(s) that appear on your proxy card(s).
To vote via the internet, please access https://vote.proxy-direct.com on
the World Wide Web and follow the on-screen instructions.
You may also call 1-800-597-7836 and vote by telephone.
If we do not receive your completed proxy cards after several weeks, our
proxy solicitor, Shareholder Communications Corporation, may contact you.
Our proxy solicitor will remind you to vote your shares or will record your
vote over the phone if you choose to vote in that manner.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense involved in validating your vote if you
fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the proxy
card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration.
For example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
------------ ---------------
<S> <C>
Corporate Accounts
(1) ABC Corp.................................. ABC Corp.
John Doe, Treasurer
(2) ABC Corp.................................. John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer......... John Doe
(4) ABC Corp. Profit Sharing Plan............. John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership....................... Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership...... Jane B. Smith, General Partner
Trust Accounts
(1) ABC Trust Account......................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78....... Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr.,
UGMA/UTMA.................................... John B. Smith
(2) Estate of John B. Smith................... John B. Smith, Jr., Executor
</TABLE>
ii
<PAGE>
PAINEWEBBER ASIA PACIFIC GROWTH FUND
(A SERIES OF PAINEWEBBER MANAGED INVESTMENTS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
1-800-647-1568
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
(A SERIES OF PAINEWEBBER PACE SELECT ADVISORS TRUST)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114
1-800-647-1568
----------------
COMBINED PROXY STATEMENT AND PROSPECTUS
DATED: DECEMBER [ ], 2000
----------------
This Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
is being furnished in connection with a Special Meeting of Shareholders of
PaineWebber Asia Pacific Growth Fund ("Asia Pacific Growth Fund"), a series of
PaineWebber Managed Investments Trust ("Managed Investments Trust"), a
Massachusetts business trust, to be held on January 25, 2001, at 1285 Avenue
of the Americas, 14th Floor, New York, New York, 10019-6028, at [ ], Eastern
time (such meeting and any adjournments thereof are referred to collectively
as the "Meeting"). At the Meeting, the shareholders of Asia Pacific Growth
Fund are being asked to consider and approve the following proposal:
To approve or disapprove the Agreement and Plan of Reorganization and
Termination ("Plan") that provides for the reorganization of Asia
Pacific Growth Fund into PaineWebber PACE International Emerging
Markets Equity Investments ("PACE International Emerging Markets Equity
Fund"), a series of PaineWebber PACE Select Advisors Trust ("PACE
Trust"). Pursuant to the Plan, Asia Pacific Growth Fund will transfer
all its assets to PACE International Emerging Markets Equity Fund,
which will assume all the stated liabilities of Asia Pacific Growth
Fund, and PACE Trust will issue to each Asia Pacific Growth Fund
shareholder the number of full and fractional shares of the applicable
class of PACE International Emerging Markets Equity Fund having an
aggregate net asset value that, on the effective date of the
reorganization, is equal to the aggregate net asset value of the
shareholder's shares in Asia Pacific Growth Fund.
A form of the Plan is attached as Appendix A to this Proxy
Statement/Prospectus. THE BOARD OF TRUSTEES OF MANAGED INVESTMENTS TRUST HAS
UNANIMOUSLY APPROVED THE PLAN AS BEING IN THE BEST INTERESTS OF ASIA PACIFIC
GROWTH FUND AND ITS SHAREHOLDERS. (Asia Pacific Growth Fund and PACE
International Emerging Markets Equity Fund sometimes are referred to
individually as a "Fund" and together as "Funds.")
Pursuant to the Plan, Asia Pacific Growth Fund will transfer all its assets
to PACE International Emerging Markets Equity Fund, which will assume all the
stated liabilities of Asia Pacific Growth Fund, and PACE Trust will issue to
each Asia Pacific Growth Fund shareholder the number of full and fractional
shares of beneficial interest in the applicable class of PACE International
Emerging Markets Equity Fund having an aggregate net asset value ("NAV") that,
on the effective date of the reorganization, is equal to the aggregate NAV of
the shareholder's shares of beneficial interest in the corresponding class of
Asia Pacific Growth Fund (the "Reorganization"). The value of each Asia
Pacific Growth Fund shareholder's account with PACE International Emerging
Markets Equity Fund immediately after the Reorganization will be the same as
the value of such shareholder's account with Asia Pacific Growth Fund
immediately prior to the Reorganization. As a result of the Reorganization,
shareholders of each class of shares of Asia Pacific Growth Fund will become
shareholders of the corresponding class of shares of PACE International
Emerging Markets Equity Fund. No sales charges will be assessed on the shares
of PACE International Emerging Markets Equity Fund issued in connection with
the Reorganization.
<PAGE>
PACE International Emerging Markets Equity Fund is a diversified series of
PACE Trust, which is an open-end management investment company currently
comprised of twelve series. PACE International Emerging Markets Equity Fund's
investment objective is capital appreciation. PACE International Emerging
Markets Equity Fund pursues its objective by investing primarily in stocks of
companies domiciled in emerging market countries. The Fund generally defines
emerging market countries as countries that are not included in the Morgan
Stanley Capital International ("MSCI") World Index of major world economies.
This Proxy Statement/Prospectus sets forth the information that a
shareholder of Asia Pacific Growth Fund should know before voting on the
proposal. It should be read carefully and retained for future reference.
A Statement of Additional Information ("SAI") dated December [ ], 2000,
containing additional information about the Reorganization, including
historical financial statements, has been filed with the Securities and
Exchange Commission ("SEC") and is hereby incorporated by reference in its
entirety into this Proxy Statement/Prospectus. PACE International Emerging
Markets Equity Fund's Annual Report to Shareholders for the fiscal year ended
July 31, 2000, has been filed with the SEC and is incorporated by reference in
the SAI. Information about Asia Pacific Growth Fund is included in its current
Prospectus and SAI, each dated March 1, 2000, as supplemented, which are on
file with the SEC and are hereby incorporated by reference into this Proxy
Statement/Prospectus. Copies of the other referenced documents, as well as
Asia Pacific Growth Fund's Semi-Annual Report to Shareholders for the six
months ended April 30, 2000, and its Annual Report to Shareholders for the
fiscal year ended October 31, 1999, are available without charge by writing
either Asia Pacific Growth Fund or PACE International Emerging Markets Equity
Fund at the address shown above, or by calling (800) 647-1568. The SEC
maintains an internet web site at http://www.sec.gov that contains information
regarding PACE Trust and Managed Investments Trust, and other registrants that
file electronically with the SEC. Copies of such material may also be
obtained, after paying a duplicating fee, from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, DC, 20549, or by electronic request at the following
e-mail address: [email protected]. Additional information about the Funds
also may be obtained on the Web at http://www.painewebber.com.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SEC HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE INFORMATION IN THIS
PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A CRIME.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
------------- ----
<S> <C>
INTRODUCTION............................................................. 1
PROPOSAL 1: TO APPROVE OR DISAPPROVE THE AGREEMENT AND PLAN OF
REORGANIZATION AND TERMINATION.......................................... 2
SYNOPSIS................................................................. 2
The Proposed Reorganization............................................ 2
Comparative Fee Table.................................................. 3
Summary Comparison of the Funds........................................ 4
COMPARISON OF PRINCIPAL RISK FACTORS..................................... 5
COMPARISON OF THE FUNDS.................................................. 6
Investment Objectives.................................................. 6
Investment Policies.................................................... 6
Operations of PACE International Emerging Markets Equity Fund Following
the Reorganization.................................................... 7
Performance............................................................ 8
Sales Charges.......................................................... 10
Dividends and Other Distributions...................................... 10
Taxes.................................................................. 10
FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING SHARES OF PACE
INTERNATIONAL EMERGING MARKETS EQUITY FUND.............................. 10
Flexible Pricing....................................................... 10
Buying Shares.......................................................... 14
Selling Shares......................................................... 15
Exchanging Shares...................................................... 16
Pricing and Valuation.................................................. 17
MANAGEMENT............................................................... 18
Investment Manager and Investment Adviser.............................. 18
Sub-Adviser............................................................ 18
Advisory Fees and Fund Expenses........................................ 18
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION.......................... 19
Reasons for the Reorganization......................................... 19
Terms of the Reorganization............................................ 21
Description of Securities to be Issued................................. 22
Temporary Waiver of Investment Restrictions............................ 22
Federal Income Tax Considerations...................................... 22
Required Vote.......................................................... 23
ORGANIZATION OF THE FUNDS................................................ 23
FINANCIAL HIGHLIGHTS..................................................... 24
CAPITALIZATION........................................................... 25
LEGAL MATTERS............................................................ 26
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION............ 26
EXPERTS.................................................................. 26
OTHER INFORMATION........................................................ 26
APPENDIX A: FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND
TERMINATION............................................................. A-1
APPENDIX B: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.............. B-1
APPENDIX C: MANAGEMENT'S DISCUSSION OF PACE INTERNATIONAL EMERGING
MARKETS EQUITY FUND'S PERFORMANCE....................................... C-1
</TABLE>
iii
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of Asia
Pacific Growth Fund, a series of Managed Investments Trust, in connection with
the solicitation of proxies by the Board for use at the Meeting. All properly
executed and unrevoked proxies received in time for the Meeting will be voted
as instructed by shareholders. Approval of the proposal requires the
affirmative vote of the lesser of (1) 67% or more of the shares of Asia
Pacific Growth Fund present at the Meeting, if more than 50% of the
outstanding shares are represented at the Meeting in person or by proxy, or
(2) more than 50% of the outstanding shares entitled to vote at the Meeting.
If you execute your proxy but give no voting instructions, your shares that
are represented by proxies will be voted "FOR" the proposal described in this
Proxy Statement/Prospectus. The presence in person or by proxy of Asia Pacific
Growth Fund shareholders entitled to cast a majority of all the votes entitled
to be cast at the Meeting will constitute a quorum. If a quorum is not present
at the Meeting or a quorum is present but sufficient votes to approve the
proposal are not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of a majority of the
shares represented at the Meeting in person or by proxy. The persons named as
proxies will vote those proxies that they are entitled to vote "FOR" the
proposal in favor of such an adjournment and will vote those proxies required
to be voted "AGAINST" the proposal against such adjournment.
Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners
or other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be
counted as shares present at the Meeting for quorum purposes but will not be
(i) considered votes cast at the Meeting or (ii) voted for or against any
adjournment or proposal. Abstentions and broker non-votes are effectively
votes against the proposal.
Any person giving a proxy has the power to revoke it at any time prior to
its exercise by executing a superseding proxy or by submitting a written
notice of revocation to the Secretary of Managed Investments Trust
("Secretary"). To be effective, such revocation must be received by the
Secretary prior to the Meeting. In addition, although mere attendance at the
Meeting will not revoke a proxy, a shareholder present at the Meeting may
withdraw his or her proxy by voting in person.
Mitchell Hutchins (not the Funds) will bear the expenses of the
Reorganization. Managed Investments Trust intends to first mail this Proxy
Statement/Prospectus and the accompanying proxy card on or about December
[ ], 2000. Shareholders of record as of the close of business on November
21, 2000 ("Record Date"), are entitled to vote at the Meeting. On the Record
Date, Asia Pacific Growth Fund had [ ] shares issued and outstanding,
consisting of [ ] Class A shares, [ ] Class B shares, [ ] Class C
shares, and [ ] Class Y shares. Shareholders are entitled to one vote for
each full share held and a fractional vote for each fractional share held.
[Except as set forth in Appendix B,] as of the Record Date, Mitchell Hutchins,
the investment manager, administrator and distributor of both Funds, does not
know of any other person who owns beneficially or of record 5% or more of any
class of shares of either Fund. [As of that same date, the Trustees and
officers, as a group, owned less than 1% of any class of either Fund's
outstanding shares.]
Managed Investments Trust has engaged the services of Shareholder
Communications Corporation ("SCC") to assist it in the solicitation of proxies
for the Meeting. Managed Investments Trust expects to solicit proxies by mail,
telephone and via the internet. Managed Investments Trust officers and
employees of Mitchell Hutchins who assist in the proxy solicitation will not
receive any additional or special compensation for any such efforts. SCC will
be paid approximately $7,500 for proxy solicitation services. Managed
Investments Trust will request broker/dealer firms, custodians, nominees and
fiduciaries to forward proxy materials to the beneficial owners of the shares
held of record by such persons. Mitchell Hutchins may reimburse such
broker/dealer firms, custodians, nominees and fiduciaries for their reasonable
expenses incurred in connection with such proxy solicitation.
1
<PAGE>
PROPOSAL: TO APPROVE OR DISAPPROVE THE AGREEMENT AND PLAN OF REORGANIZATION
AND TERMINATION.
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus, the Statement of Additional Information, and
the Plan. As discussed more fully below, Managed Investments Trust's Board
believes that the proposed Reorganization will benefit Asia Pacific Growth
Fund's shareholders.
THE PROPOSED REORGANIZATION
The Boards of PACE Trust and Managed Investments Trust, including their
respective Trustees who are not "interested persons," as that term is defined
in the Investment Company Act of 1940, as amended ("1940 Act") ("Independent
Trustees"), considered and approved the Plan at meetings held on September 13,
2000 and October 6, 2000, respectively. The Plan provides for the acquisition
by PACE International Emerging Markets Equity Fund of all of Asia Pacific
Growth Fund's assets in exchange for PACE International Emerging Markets
Equity Fund shares and the assumption by PACE International Emerging Markets
Equity Fund of all of Asia Pacific Growth Fund's stated liabilities. Asia
Pacific Growth Fund will then distribute the PACE International Emerging
Markets Equity Fund shares to Asia Pacific Growth Fund's shareholders, by
class, so that each Asia Pacific Growth Fund shareholder will receive the
number of full and fractional shares of the corresponding class of PACE
International Emerging Markets Equity Fund equal in aggregate NAV to the
aggregate NAV of the shares of Asia Pacific Growth Fund that the shareholder
held at the time of the Reorganization. These transactions are scheduled to
occur as of 4:00 p.m., Eastern time, on February 9, 2001, or on such later
date as the conditions to consummation of the Reorganization are satisfied
("Closing Date"). Asia Pacific Growth Fund will be terminated as soon as is
practicable after the Closing Date. See "Additional Information About the
Reorganization," below.
Managed Investments Trust and PACE Trust will each receive an opinion of
Kirkpatrick & Lockhart LLP to the effect that the Reorganization will
constitute a tax-free reorganization within the meaning of section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code").
Accordingly, neither Fund nor any of its shareholders will recognize any gain
or loss for federal income tax purposes as a direct result of the
Reorganization. To the extent Asia Pacific Growth Fund sells securities prior
to the Closing Date, it may recognize net gains or losses. Any such net
recognized gains would increase the amount of any distribution made to
shareholders of Asia Pacific Growth Fund prior to the Closing Date. See
"Additional Information About the Reorganization--Federal Income Tax
Considerations," below.
For the reasons set forth below under "Additional Information About the
Reorganization--Reasons for the Reorganization," the Board of Managed
Investments Trust has determined that the Reorganization is in the best
interests of Asia Pacific Growth Fund and that the interests of existing Asia
Pacific Growth Fund shareholders will not be diluted as a result of the
Reorganization. ACCORDINGLY, MANAGED INVESTMENTS TRUST'S BOARD UNANIMOUSLY
RECOMMENDS APPROVAL OF THE REORGANIZATION.
2
<PAGE>
COMPARATIVE FEE TABLE
The table below describes the fees and expenses that you would pay if you
buy and hold Asia Pacific Growth Fund shares or PACE International Emerging
Markets Equity Fund shares before the Reorganization and PACE International
Emerging Markets Equity Fund shares after the Reorganization. The "Annual Fund
Operating Expenses" set forth below are based on the fees and expenses for the
fiscal year ended July 31, 2000 for PACE International Emerging Markets Equity
Fund and for the six months ended April 30, 2000 (annualized) for Asia Pacific
Growth Fund. The pro forma information reflects the anticipated effects of the
Reorganization as well as the proposed reorganization of PaineWebber Emerging
Markets Equity Fund with PACE International Emerging Markets Equity Fund,
which is expected to occur at approximately the same time as the
Reorganization.
<TABLE>
<CAPTION>
COMBINED PACE INTERNATIONAL
ASIA PACIFIC GROWTH PACE INTERNATIONAL EMERGING EMERGING MARKETS
FUND MARKETS EQUITY FUND EQUITY FUND PRO FORMA*
----------------------- ------------------------------- -------------------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C Y A B C Y A B C Y
----- ----- ----- ----- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)
Maximum Sales Charge (load)
Imposed on Purchases (as a
percentage of offering
price)..................... 4.5% None None None 4.5% None None None 4.5% None None None
Maximum Deferred Sales
Charge (load) (as a
percentage of original
purchase price or
redemption proceeds,
whichever is less)......... None 5% 1% None None 5% 1% None None 5% 1% None
Exchange Fee................ None None None None None None None None None None None None
ANNUAL FUND OPERATING EXPENSES (fees that are deducted from fund assets)
Management Fees**........... 1.20% 1.20% 1.20% 1.20% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10%
Distribution and/or Service
(12b-1) Fees............... 0.25% 1.00% 1.00% None 0.25% 1.00% 1.00% None 0.25% 1.00% 1.00% None
Other Expenses***........... 0.91% 0.94% 0.89% 0.84% 0.66% 0.68% 0.67% 0.65% 0.61% 0.63% 0.62% 0.60%
----- ----- ----- ----- ------- ------- ------- ------- ------- ------- ------- -------
Total Annual Fund Operating
Expenses................... 2.36% 3.14% 3.09% 2.04% 2.01% 2.78% 2.77% 1.75% 1.96% 2.73% 2.72% 1.70%
===== ===== ===== ===== ======= ======= ======= ======= ======= ======= ======= =======
Management Fee Waiver /
Expense Reimbursements..... N/A N/A N/A N/A (0.25)% (0.25)% (0.25)% (0.25)% (0.20)% (0.20)% (0.20)% (0.20)%
----- ----- ----- ----- ------- ------- ------- ------- ------- ------- ------- -------
Net Expenses+............... 2.36% 3.14% 3.09% 2.04% 1.76% 2.53% 2.52% 1.50% 1.76% 2.53% 2.52% 1.50%
===== ===== ===== ===== ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
----------------
* The pro forma expense information assumes that shareholders of Asia Pacific
Growth Fund and PaineWebber Emerging Markets Equity Fund approve the
proposed reorganizations. If shareholders of Asia Pacific Growth Fund
approve the Reorganization and shareholders of PaineWebber Emerging Markets
Equity Fund do not approve its reorganization, the pro forma "Net Expenses"
for each class of shares of the combined Fund would be the same as shown
above due to the management fee waiver and expense reimbursement arrangement
in effect for PACE International Emerging Markets Equity Fund.
** For both Funds, "Management Fees" include fees paid to Mitchell Hutchins
for administrative services.
*** "Other Expenses" for PACE International Emerging Markets Equity Fund are
estimated based on the "other expenses" of the Fund's outstanding Class P
shares for the fiscal year ended July 31, 2000, as adjusted to reflect
estimated transfer agency expenses for each class. "Other Expenses" for
each class of the combined Fund are based on the combined assets of Asia
Pacific Growth Fund, PaineWebber Emerging Markets Equity and PACE
International Emerging Markets Equity Fund.
+ PACE Trust and Mitchell Hutchins have entered into a written management fee
waiver and expense reimbursement agreement with respect to PACE
International Emerging Markets Equity Fund under which Mitchell Hutchins is
contractually obligated to waive its management fees and/or reimburse the
Fund to the extent that the total operating expenses of each class through
December 1, 2002 otherwise would exceed the sum of 1.50% (the expense cap
for the Fund's Class P shares) plus the 12b-1 fees, if any, and any higher
transfer agency fees applicable to the class. The Fund has agreed to repay
Mitchell Hutchins for any reimbursed expenses if it can do so over the
following three fiscal years without causing the Fund's expenses in any of
those three years to exceed these expense caps.
3
<PAGE>
The example below is intended to help you compare the costs of investing in
each Fund, both before and after the Reorganization.
The example below assumes that you invest $10,000 in each Fund (including
the combined Fund) for the time periods indicated and then sell all of your
shares at the end of those periods. The example also assumes that your
investments each have a 5% return each year and that each Fund's operating
expenses remain the same, except for the two year period when PACE
International Emerging Markets Equity Fund's and the combined Fund's expenses
are lower due to the agreement with Mitchell Hutchins. Although your actual
returns and costs may be higher or lower, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
3 5
1 YEAR YEARS YEARS 10 YEARS
------ ------ ------ --------
<S> <C> <C> <C> <C>
ASIA PACIFIC GROWTH FUND
Class A......................................... $678 $1,153 $1,654 $3,025
Class B (assuming sale of all shares at end of
period)........................................ 817 1,269 1,845 3,104
Class B (assuming no sale of shares)............ 317 969 1,645 3,104
Class C (assuming sale of all shares at end of
period)........................................ 412 954 1,620 3,402
Class C (assuming no sale of shares)............ 312 954 1,620 3,402
Class Y......................................... 207 640 1,098 2,369
PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND
Class A......................................... $621 $1,005 $1,439 $2,643
Class B (assuming sale of all shares at end of
period)........................................ 756 1,114 1,624 2,717
Class B (assuming no sale of shares)............ 256 814 1,424 2,717
Class C (assuming sale of all shares at end of
period)........................................ 355 811 1,419 3,062
Class C (assuming no sale of shares)............ 255 811 1,419 3,062
Class Y......................................... 153 501 901 2,020
PRO FORMA PACE INTERNATIONAL EMERGING MARKETS
EQUITY FUND
Class A......................................... $621 $1,000 $1,423 $2,601
Class B (assuming sale of all shares at end of
period)........................................ 756 1,108 1,608 2,675
Class B (assuming no sale of shares)............ 256 808 1,408 2,675
Class C (assuming sale of all shares at end of
period)........................................ 355 805 1,403 3,021
Class C (assuming no sale of shares)............ 255 805 1,403 3,021
Class Y......................................... 153 496 884 1,974
</TABLE>
SUMMARY COMPARISON OF THE FUNDS
Investment Objectives and Policies
The Funds have similar investment objectives and overall risk
characteristics. Each Fund seeks capital appreciation. However, while both
Funds invest in stocks of companies in emerging market countries, they do so
to different extents and subject to different geographical parameters. Asia
Pacific Growth Fund invests primarily in stocks of companies in the Asia
Pacific Region (other than Japan), including stocks of companies in developed
and emerging market countries within that region. PACE International Emerging
Markets Equity Fund invests primarily in stocks of companies domiciled in
emerging market countries and is not limited to any one geographic region.
Investment Advisory Services
Mitchell Hutchins has served as investment manager and administrator for
PACE International Emerging Markets Equity Fund since its inception in August
1995. As investment manager for the Fund, Mitchell Hutchins provides portfolio
management oversight rather than directly managing the Fund's investments.
Mitchell Hutchins provides portfolio management oversight principally by
performing initial reviews of prospective sub-advisers and supervising and
monitoring the performance of those sub-advisers thereafter. Mitchell Hutchins
also recommends to the Board of PACE Trust whether agreements with sub-
advisers should be renewed, modified or terminated. The Fund's current sub-
adviser -- Schroder Investment Management North America Inc. ("SIMNA") -- has
managed the Fund's investment portfolio since its inception.
4
<PAGE>
Mitchell Hutchins has served as investment adviser and administrator for
Asia Pacific Growth Fund since its inception in March 1997. SIMNA also has
served as the Fund's sub-adviser and managed its investment portfolio since
its inception.
Purchase and Redemption Procedures
Funds in the PaineWebber Flexible PricingSM System generally offer Class A,
Class B, Class C and Class Y shares. PACE International Emerging Markets
Equity Fund did not offer Class A, Class B, Class C and Class Y shares to the
public prior to November 27, 2000. The purchase and redemption procedures for
PACE International Emerging Markets Equity Fund's Class A, Class B, Class C
and Class Y shares would be the same as those currently in effect for the
corresponding classes of shares of Asia Pacific Growth Fund. You may exchange
Class A, Class B or Class C shares of PACE International Emerging Markets
Equity Fund for shares of the same class of most other PACE funds or of
PaineWebber Money Market Fund. Exchanges between other PaineWebber funds and
PACE funds will not be activated until on or around March 1, 2001. You may not
exchange Class Y shares.
COMPARISON OF PRINCIPAL RISK FACTORS
Both Funds are subject to similar risk factors associated with their
investments in foreign equities. An investment in either Fund is not
guaranteed; an investor may lose money by investing in either Fund. The
principal risks presented by the Funds are:
Equity Risk -- The prices of common stocks and other equity securities
generally fluctuate more than those of other investments. They reflect changes
in the issuing company's financial condition and changes in the overall
market. A Fund may lose a substantial part, or even all, of its investment in
a company's stock.
Foreign Investing and Emerging Markets Risks -- Foreign investing involves
risks relating to political, social and economic developments abroad to a
greater extent than investing in the securities of U.S. issuers. In addition,
there are differences between U.S. and foreign regulatory requirements and
market practices. Foreign investments denominated in foreign currencies are
subject to the risk that the value of a foreign currency will fall in relation
to the U.S. dollar. Currency exchange rates can be volatile and can be
affected by, among other factors, the general economics of a country, the
actions of U.S. and foreign governments or central banks, the imposition of
currency controls and speculation.
Securities of issuers located in emerging market countries are subject to
all of the risks of other foreign securities. However, the level of those
risks often is higher due to the fact that social, political, legal and
economic systems in emerging market countries may be less fully developed and
less stable than those in developed countries. Emerging market securities also
may be subject to additional risks, such as lower liquidity and larger or more
rapid changes in value.
Geographic and Regional Concentration Risk -- PACE International Emerging
Markets Equity Fund will not necessarily seek to diversify its investments on
a geographic basis within the emerging markets category. To the extent the
Fund concentrates its investments in issuers located in one country or area,
it is more susceptible to factors adversely affecting that country or area.
Asia Pacific Growth Fund invests primarily in stocks of companies in the Asia
Pacific Region (excluding Japan). Factors affecting this region will affect
the value of the Fund's investments more than if the Fund invested in several
geographic areas. The Asia Pacific Region countries in which the Fund invests
generally have less stable economies, stock markets, currencies and political
systems than countries of Europe or North America. Also, countries in the Asia
Pacific Region generally are heavily dependent on international trade and on
the availability of foreign capital. This makes these countries more subject
to external influences.
Derivatives Risk -- The value of "derivatives" -- so-called because their
value "derives" from the value of an underlying asset, reference rate or
index -- may rise or fall more rapidly than other investments. For some
derivatives, it is possible for a Fund to lose more than the amount it
invested in the derivative. Options, futures
5
<PAGE>
contracts and forward currency contracts are examples of derivatives. A Fund's
use of derivatives may not succeed for various reasons, including unexpected
changes in the value of the derivatives or the assets underlying them. Also,
if a Fund uses derivatives to adjust or "hedge" the overall risk of the
portfolio, the hedge may not succeed if changes in the values of the
derivatives are not matched by opposite changes in the value of the assets
being hedged.
COMPARISON OF THE FUNDS
INVESTMENT OBJECTIVES
The Funds have similar investment objectives in that each seeks capital
appreciation. PACE International Emerging Markets Equity Fund's investment
objective is capital appreciation, while Asia Pacific Growth Fund's investment
objective is long-term capital appreciation.
INVESTMENT POLICIES
The Funds have different investment policies. Although both Funds invest in
stocks of companies in emerging market countries, they do so to different
extents and subject to different geographical parameters. Asia Pacific Growth
Fund invests primarily in stocks of companies domiciled in the Asia Pacific
Region (other than Japan), including stocks of companies domiciled in
developed and emerging market countries within that region. PACE International
Emerging Markets Equity Fund invests primarily in stocks of companies
domiciled in emerging market countries and is not limited to any one
geographic region.
PACE International Emerging Markets Equity Fund generally defines emerging
market countries as countries that are not included in the MSCI World Index of
major world economies. Countries included in this index may be considered
emerging markets based on current political and economic factors. For example,
SIMNA has determined, based on an analysis of current economic and political
factors pertaining to Hong Kong SAR, that Hong Kong SAR should be considered
as an emerging market country for purposes of PACE International Emerging
Markets Equity Fund's eligible investments. PACE International Emerging
Markets Equity Fund may not always diversify its investments on a geographic
basis among emerging market countries.
In selecting investments for each Fund, SIMNA focuses on companies that it
believes have a sustainable competitive advantage and growth potential that is
undervalued by other investors. SIMNA allocates PACE International Emerging
Markets Equity Fund's assets among emerging market countries, and Asia Pacific
Growth Fund's assets among Asia Pacific Region countries, based on its
assessment of the likelihood that those countries will have favorable long-
term business environments. In deciding which securities within a country to
buy or sell for each Fund, SIMNA analyzes historical growth rates and future
growth prospects, management capability and profit margins. SIMNA's evaluation
of securities reflects information available from the extensive network of
locally based analysts maintained by SIMNA and its affiliates. SIMNA generally
sells securities when either the country or the issuer no longer meets these
selection criteria or when it identifies more attractive investment
opportunities.
Debt Securities. PACE International Emerging Markets Equity Fund may invest
up to 35% of its total assets in bonds, including up to 10% of its total
assets in bonds (including convertible bonds) that are below investment grade.
Asia Pacific Growth Fund may invest up to 10% of its total assets in
convertible and non-convertible bonds (which may be below investment grade) of
governmental or private issuers in the Asia Pacific Region. Below investment
grade securities are commonly known as "junk bonds."
Derivatives. The Funds have identical policies with respect to the use of
options, futures contracts, forward currency contracts, and other derivatives.
Each Fund may (but is not required to) use options, futures contracts, forward
currency contracts and other derivatives as part of its investment strategy or
to help manage portfolio risks.
6
<PAGE>
Temporary Defensive Positions; Cash Reserves. Each Fund may take a
defensive position that is different from its normal investment strategy to
protect itself from adverse market conditions. This means that each Fund may
temporarily invest a larger-than-normal part, or even all, of its assets in
cash or money market instruments. In addition, each Fund may increase its cash
reserves to facilitate the transition to the investment style and strategies
of a new sub-adviser. Because these investments provide relatively low income,
a defensive or transitional position may not be consistent with achieving a
Fund's investment objective. PACE International Emerging Markets Equity Fund
is normally fully invested in accordance with its investment objective and
policies. However, with the concurrence of Mitchell Hutchins, PACE
International Emerging Markets Equity Fund may take a defensive position that
is different from its normal investment strategy.
Each Fund may invest to a limited extent in money market instruments as a
cash reserve for liquidity or other purposes.
Other Investment Policies. Each Fund may invest up to 15% of its net assets
in illiquid securities. Each Fund may lend its portfolio securities to
qualified broker-dealers or institutional investors in an amount up to 33 1/3%
of its total assets. PACE International Emerging Markets Equity Fund and Asia
Pacific Growth Fund may borrow money from banks or through reverse repurchase
agreements for temporary or emergency purposes, but not in excess of 10% and
33 1/3% of each Fund's respective total assets. Neither Fund may purchase
securities while borrowings in excess of 5% of its total assets are
outstanding. Each Fund may invest, to a limited extent, in securities of other
investment companies and may sell short "against the box."
Portfolio Turnover. Each Fund may engage in frequent trading to achieve its
investment objectives. Frequent trading may result in portfolio turnover of
100% or more (high portfolio turnover). Frequent trading may increase the
portion of a Fund's capital gains that is realized for tax purposes in any
given year, which may increase the Fund's taxable distributions in that year.
Frequent trading also may increase the portion of a Fund's realized capital
gains that is considered "short-term" for tax purposes. Shareholders will pay
higher taxes on distributions that represent net short-term capital gains than
they would pay on distributions that represent net long-term capital gains.
Frequent trading also may result in higher fund expenses due to transaction
costs. Neither Fund restricts the frequency of trading to limit expenses or
the tax effect that its distributions may have on shareholders. The portfolio
turnover rates for Asia Pacific Growth Fund for the six months ended April 30,
2000 (annualized) and the last two fiscal years ended October 31, 1999 and
1998, were 28%, 70% and 59%, respectively, while the portfolio turnover rates
for PACE International Emerging Markets Equity Fund's last two fiscal years
ended July 31, 2000 and 1999, were 115% and 66%, respectively.
OPERATIONS OF PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND FOLLOWING THE
REORGANIZATION
It is not expected that PACE International Emerging Markets Equity Fund
will revise any of its policies following the Reorganization to reflect those
of Asia Pacific Growth Fund. SIMNA has reviewed Asia Pacific Growth Fund's
current portfolio and determined that Asia Pacific Growth Fund's holdings of
stocks of companies in emerging market countries generally are compatible with
PACE International Emerging Markets Equity Fund's portfolio. However, Asia
Pacific Growth Fund holds securities of companies in developed markets within
the Asia Pacific Region that are not appropriate investments for PACE
International Emerging Markets Equity Fund. In addition, some emerging markets
countries (including India, Korea, Malaysia and Taiwan) do not permit
ownership of securities to be transferred from one fund to another as part of
a reorganization. If shareholders of Asia Pacific Growth Fund approve the
Reorganization, all these securities will be liquidated in an orderly manner
in connection with the Reorganization, and the proceeds of these sales
reinvested in assets that are consistent with the holdings of PACE
International Emerging Markets Equity Fund or held in temporary investments
until after the Reorganization is effected. As of November 30, 2000, Asia
Pacific Growth Fund's investments in these securities represented
approximately [ ]% of its total portfolio. The relative portion of Asia
Pacific Growth Fund's assets represented by these investments may change
depending on changes in market conditions.
The need for Asia Pacific Growth Fund to dispose of assets in connection
with the Reorganization may result in the Fund's selling securities at a
disadvantageous time, and could result in Asia Pacific Growth Fund's
7
<PAGE>
realizing gains (or losses) that would not otherwise have been realized.
[Because the Fund [had approximately $ million in capital loss carryforwards
as of November 30, 2000] [has significant capital loss carryforwards] to
offset any realized capital gains, the liquidation of these assets is not
expected to result in any significant additional distributions to the Fund's
shareholders.] It is also expected that some of Asia Pacific Growth Fund's
holdings may not remain at the time of the Reorganization due to normal
portfolio turnover.
PERFORMANCE
The following bar chart and table provide information about the performance
of PACE International Emerging Markets Equity Fund Class P shares and thus
give some indication of the risks of an investment in the Fund. The Fund's
Class P shares were the only outstanding class of shares during the periods
shown.
The bar chart shows how PACE International Emerging Markets Equity Fund's
performance has varied from year to year. The bar chart does not reflect the
maximum annual PACESM Select Advisors Program fee of 1.50% (which does not
apply to shares received in the Reorganization) or the effect of sales charges
or the higher expenses of PACE International Emerging Markets Equity Fund's
Class A, Class B and Class C shares; if it did, the total returns shown would
be lower.
The first table that follows the bar chart shows the average annual returns
over several time periods for the Fund's Class P shares. Class P shares are
not subject to the sales charges applicable to the Fund's Class A, Class B and
Class C shares or the higher expenses of these shares. However, because all
classes of shares invest in the same portfolio of securities, their annual
returns would differ only to the extent of the different sales charges or
expenses. The table also does not reflect the maximum annual PACESM Select
Advisors Program fee applicable only to Class P shares.
The second table that follows the bar chart shows the average annual total
returns over several time periods for Asia Pacific Growth Fund's Class A,
Class B, Class C and Class Y shares. This table reflects sales charges and
12b-1 fees for Class A, Class B and Class C shares of the Fund. The Fund's
Class Y shares are not subject to any sales charges or 12b-1 fees and thus are
most comparable to the Class P shares of PACE International Emerging Markets
Equity Fund.
The tables also compare each Fund's returns to returns of a broad-based
market index that is unmanaged and, therefore, does not reflect the deduction
of any fees or expenses. The two Funds have historically used different
indices -- the MSCI All Country Asia Pacific Free (ex-Japan) Index for Asia
Pacific Growth Fund and the MSCI Emerging Markets Free Index for PACE
International Emerging Markets Equity Fund. For comparative purposes, the
returns of both indices are shown for each Fund in the tables below.
Each Fund's past performance does not necessarily indicate how it will
perform in the future.
8
<PAGE>
PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND -- TOTAL RETURN ON CLASS P
SHARES
[GRAPH]
1996 8.52%
1997 -4.72%
1998 -24.43%
1999 61.85%
Calendar Year
Total return January 1 to September 30, 2000 -- (24.35)%
Best quarter during years shown: 4th quarter, 1999 -- 27.14%
Worst quarter during years shown: 3rd quarter, 1998 -- (21.52)%
PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)
<TABLE>
<CAPTION>
MSCI ALL COUNTRY ASIA
CLASS CLASS P MSCI EMERGING PACIFIC FREE (EX-
(INCEPTION DATE) (8/24/95) MARKETS FREE INDEX JAPAN) INDEX
---------------- --------- ------------------ ---------------------
<S> <C> <C> <C>
One Year..................... 61.85% 66.41% 55.23%
Life of Class................ 5.08% 3.14% 1.62%
</TABLE>
ASIA PACIFIC GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS
(as of December 31, 1999)
<TABLE>
<CAPTION>
MSCI ALL COUNTRY MSCI EMERGING
CLASS CLASS A CLASS B CLASS C CLASS Y ASIA PACIFIC FREE MARKETS FREE
(INCEPTION DATE) (3/25/97) (3/25/97) (3/25/97) (3/13/98) (EX-JAPAN) INDEX INDEX
---------------- --------- --------- --------- --------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
One Year................ 59.90% 60.97% 65.11% 67.72% 55.23% 66.41%
Life of Class........... (2.51)% (2.68)% (1.58)% 20.68% * *
</TABLE>
----------------
* Average annual total returns for the MSCI All Country Asia Pacific Free (ex-
Japan) Index and MSCI Emerging Markets Free Index for the life of each class
were as follows: Class A, Class B and Class C -- 0.37% and (0.49)%,
respectively, and Class Y -- 16.78% and 11.49%, respectively.
9
<PAGE>
SALES CHARGES
No sales charges apply when Asia Pacific Growth Fund shareholders receive
shares of PACE International Emerging Markets Equity Fund in connection with
the Reorganization.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund normally declares and pays dividends and distributes
substantially all of its gains, if any, annually. Classes with higher expenses
are expected to have lower dividends. For example, Class B and Class C shares
are expected to have the lowest dividends of any class of a Fund's shares,
while Class Y shares (and, for PACE International Emerging Markets Equity
Fund, Class P shares) would have the highest dividends.
As a shareholder of PACE International Emerging Markets Equity Fund, you
will receive dividends in additional shares of the Fund unless you elect to
receive them in cash. Your current dividend distribution election for Asia
Pacific Growth Fund will remain the same after the Reorganization. Contact
your Financial Advisor at PaineWebber if you prefer to receive dividends in
cash.
On or before the Closing Date, Asia Pacific Growth Fund will distribute
substantially all of its undistributed net investment income, net capital
gain, net short-term capital gain and net gains from foreign currency
transactions, if any, in order to continue to maintain its tax status as a
regulated investment company.
TAXES
The dividends that you receive from either Fund generally are subject to
federal income tax regardless of whether you receive them in additional Fund
shares or in cash. If you hold Fund shares through a tax-exempt account or
plan, such as an IRA or 401(k) plan, dividends on your shares generally will
not be subject to tax.
When you sell Fund shares, you generally will be subject to federal income
tax on any gain you realize. If you exchange any Fund's shares for shares of
another PaineWebber mutual fund, the transaction will be treated as a sale of
the first fund's shares, and any gain will be subject to federal income tax.
Any distribution of capital gains may be taxed at a lower rate than
ordinary income, depending on whether the Fund held the assets that generated
the gains for more than 12 months. A Fund will tell you annually how you
should treat its dividends for tax purposes.
FLEXIBLE PRICING: BUYING, SELLING AND EXCHANGING
SHARES OF PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND
FLEXIBLE PRICING
PACE International Emerging Markets Equity Fund offers four new classes of
shares -- Class A, Class B, Class C and Class Y -- established prior to the
Reorganization. The four new classes of shares of PACE International Emerging
Markets Equity Fund and the procedures for buying, selling and exchanging
these shares, as described below, are substantially identical to the
corresponding classes of shares and related procedures of Asia Pacific Growth
Fund. Prior to November 27, 2000, PACE International Emerging Markets Equity
Fund offered only Class P shares, which are available only to participants in
the PaineWebber PACE SM Select Advisors Program.
No sales charges apply when Asia Pacific Growth Fund shareholders receive
Class A, Class B, Class C or Class Y shares of PACE International Emerging
Markets Equity Fund as part of the Reorganization. PACE International Emerging
Markets Equity Fund is offering its four new classes of shares to the general
public prior to the Reorganization. Class Y shares are only available to
certain types of investors. Class A, Class B and Class C shares purchased
other than as part of the Reorganization will be subject to the sales charges
described below. In addition, each class has different ongoing expenses.
10
<PAGE>
PACE International Emerging Markets Equity Fund has adopted a plan under
Rule 12b-1 governing its Class A, Class B and Class C shares that allows it to
pay service fees for providing services to shareholders and (for Class B and
Class C shares) distribution fees for the sale of its shares. The terms of
these plans are substantially identical to the terms of the corresponding
plans now in place for Asia Pacific Growth Fund's Class A, Class B and Class C
shares. Because the 12b-1 distribution fees for Class B and Class C shares are
paid out of the Fund's assets on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than if you paid a
front-end sales charge.
CLASS A SHARES
Class A shares have a front-end sales charge that is included in the
offering price of the Class A shares. This sales charge is not invested in the
Fund. Class A shares pay an annual 12b-1 service fee of 0.25% of average net
assets, but they pay no 12b-1 distribution fees. The ongoing expenses for
Class A shares are lower than for Class B and Class C shares.
The Class A sales charges are described in the following table.
CLASS A SALES CHARGES
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF: REALLOWANCE TO SELECTED DEALERS
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED AS PERCENTAGE OF OFFERING PRICE*
-------------------- -------------- ------------------- --------------------------------
<S> <C> <C> <C>
Less than $50,000....... 4.50% 4.71% 4.25%
$50,000 to $99,999...... 4.00 4.17 3.75
$100,000 to $249,999.... 3.50 3.63 3.25
$250,000 to $499,999.... 2.50 2.56 2.25
$500,000 to $999,999.... 1.75 1.78 1.50
$1,000,000 and over
(1).................... None None 1.00(2)
</TABLE>
----------------
(1) A contingent deferred sales charge of 1% of the shares' offering price or
the net asset value at the time of sale by the shareholder, whichever is
less, is charged on sales of shares made within one year of the purchase
date. Class A shares representing reinvestment of dividends are not
subject to this 1% charge. Withdrawals in the first year after purchase of
up to 12% of the value of the fund account under the Fund's Systematic
Withdrawal Plan are not subject to this charge.
(2) Mitchell Hutchins pays 1% to the dealer.
* For an initial period ending on or about December 29, 2000, Mitchell
Hutchins will reallow the full amount of the sales charge to selected
dealers.
Sales Charge Reductions and Waivers. You may qualify for a lower sales
charge if you already own Class A shares of a PaineWebber or PaineWebber PACE
mutual fund. You can combine the value of Class A shares that you own in other
PaineWebber or PaineWebber PACE funds and the purchase amount of the Class A
shares of the PaineWebber fund that you are buying.
You may also qualify for a lower sales charge if you combine your purchases
with those of:
. your spouse, parents or children under age 21;
. your Individual Retirement Accounts (IRAs);
. certain employee benefit plans, including 401(k) plans;
. a company that you control;
. a trust that you created;
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<PAGE>
. Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts
created by you or by a group of investors for your children; or
. accounts with the same adviser.
You may qualify for a complete waiver of the sales charge if you:
. Are an employee of PaineWebber or its affiliates or the spouse,
parent or child under age 21 of a PaineWebber employee;
. Buy these shares through a PaineWebber Financial Advisor who was
formerly employed as an investment executive with a competing
brokerage firm that was registered as a broker-dealer with the SEC,
and
-- you were the Financial Advisor's client at the competing
brokerage firm;
-- within 90 days of buying shares in a fund, you sell shares of
one or more mutual funds that were principally underwritten by
the competing brokerage firm or its affiliates, and you either
paid a sales charge to buy those shares, pay a contingent
deferred sales charge when selling them or held those shares
until the contingent deferred sales charge was waived; and
-- you purchase an amount that does not exceed the total amount of
money you received from the sale of the other mutual fund;
. Acquire these shares through the reinvestment of dividends of a
PaineWebber unit investment trust;
. Are a 401(k) or 403(b) qualified employee benefit plan with 50 or
more eligible employees in the plan or at least $1 million in assets;
. Are a participant in the PaineWebber Members OnlySM Program. For
investments made pursuant to this waiver, Mitchell Hutchins may make
payments out of its own resources to PaineWebber and to participating
membership organizations in a total amount not to exceed 1% of the
amount invested; or
. Acquire these shares through a PaineWebber InsightOneSM Program
brokerage account.
CLASS B SHARES
Class B shares have a contingent deferred sales charge. When you purchase
Class B shares, we invest 100% of your purchase in Fund shares. However, you
may have to pay the deferred sales charge when you sell your Fund shares,
depending on how long you own the shares.
Class B shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
If you hold your Class B shares for six years, they will automatically convert
to Class A shares, which have lower ongoing expenses.
12
<PAGE>
If you sell Class B shares before the end of six years, you will pay a
deferred sales charge. We calculate the deferred sales charge by multiplying
the lesser of the net asset value of the Class B shares at the time of
purchase or the net asset value at the time of sale by the percentage shown
below:
<TABLE>
<CAPTION>
PERCENTAGE BY WHICH THE
SHARES' NET ASSET
IF YOU SELL SHARES WITHIN: VALUE IS MULTIPLIED:
-------------------------- -----------------------
<S> <C>
1st year since purchase.............................. 5%
2nd year since purchase.............................. 4
3rd year since purchase.............................. 3
4th year since purchase.............................. 2
5th year since purchase.............................. 2
6th year since purchase.............................. 1
7th year since purchase.............................. None
</TABLE>
We will not impose the deferred sales charge on Class B shares representing
reinvestment of dividends or on withdrawals in any year of up to 12% of the
value of your Class B shares under the Systematic Withdrawal Plan.
For purposes of determining your deferred sales charge and when to convert
your Class B shares to Class A shares, the holding period for the Class B
shares of PACE International Emerging Markets Equity Fund that you receive in
connection with the Reorganization will include the period for which you held
the corresponding Class B shares of Asia Pacific Growth Fund and any other
PaineWebber fund whose shares you exchanged for Class B shares of Asia Pacific
Growth Fund.
To minimize your deferred sales charge, we will assume that you are
selling:
. First, Class B shares representing reinvested dividends, and
. Second, Class B shares that you have owned the longest.
Sales Charge Waivers. You may qualify for a waiver of the deferred sales
charge on a sale of shares if:
. You participate in the Systematic Withdrawal Plan;
. You are older than 59 1/2 and are selling shares to take a
distribution from certain types of retirement plans;
. You receive a tax-free return of an excess IRA contribution;
. You receive a tax-qualified retirement plan distribution following
retirement;
. The shares are sold within one year of your death and you owned the
shares either (1) as the sole shareholder or (2) with your spouse as
a joint tenant with the right of survivorship; or
. The shares are held in trust and the death of the trustee requires
liquidation of the trust.
CLASS C SHARES
Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you purchase Class C shares, we will invest 100% of
your purchase in Fund shares.
Class C shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
Class C shares do not convert to another class of shares. This means that you
will pay the 12b-1 fees for as long as you own your shares.
Class C shares also have a contingent deferred sales charge. You may have
to pay the deferred sales charge if you sell your shares within one year of
the date you purchased them. We calculate the deferred sales charge on sales
of Class C shares by multiplying 1.00% by the lesser of the net asset value of
the Class C shares at the
13
<PAGE>
time of purchase or the net asset value at the time of sale. We will not
impose the deferred sales charge on Class C shares representing reinvestment
of dividends or on withdrawals in the first year after purchase, of up to 12%
of the value of your Class C shares under the Systematic Withdrawal Plan.
For purposes of determining your deferred sales charge, the holding period
for the Class C shares of PACE International Emerging Markets Equity Fund that
you receive in connection with the Reorganization will include the period for
which you held the corresponding Class C shares of Asia Pacific Growth Fund
and any other PaineWebber fund whose shares you exchanged for Class C shares
of Asia Pacific Growth Fund.
You may be eligible to sell your shares without paying a contingent
deferred sales charge if you are a 401(k) or 403(b) qualified employee benefit
plan with 50 or more eligible employees in the plan or at least $1 million in
assets.
NOTE ON SALES CHARGE WAIVERS FOR CLASS A, CLASS B AND CLASS C SHARES:
If you think that you qualify for any of these sales charge waivers
described above, you will need to provide documentation to PaineWebber or the
Fund. For more information, you should contact your PaineWebber Financial
Advisor or correspondent firm or call 1-800-647-1568. If you want information
on the Fund's Systematic Withdrawal Plan, see the SAI or contact your
PaineWebber Financial Advisor or correspondent firm.
CLASS Y SHARES
Class Y shares have no sales charge. Only specific types of investors can
purchase Class Y shares. You may be eligible to purchase Class Y shares if
you:
. Buy shares through PaineWebber's PACESM Multi Advisor Program;
. Buy $10 million or more of PaineWebber fund shares at any one time;
. Are a qualified retirement plan with 5,000 or more eligible employees
or $50 million in assets;
. Are a corporation, bank, trust company, insurance company, pension
fund, employee benefit plan, professional firm, trust, estate or
educational, religious or charitable organization with 5,000 or more
employees or with over $50 million in investable assets; or
. Are an investment company advised by PaineWebber or an affiliate of
PaineWebber.
The trustee of PaineWebber's 401(k) Plus Plan for its employees is also
eligible to purchase Class Y shares.
Class Y shares do not pay ongoing distribution or service fees or sales
charges. The ongoing expenses for Class Y shares are the lowest for all the
classes.
BUYING SHARES
If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase fund shares through your Financial Advisor. Otherwise,
you can invest in the Fund through the Fund's transfer agent, PFPC Inc. You
can obtain an application by calling 1-800-647-1568. You must complete and
sign the application and mail it, along with a check, to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
14
<PAGE>
You do not have to complete an application when you make additional
investments in the Fund.
The Fund and Mitchell Hutchins reserve the right to reject a purchase order
or suspend the offering of shares.
Minimum Investments
<TABLE>
<S> <C>
To open an account.......................... $1,000
To add to an account........................ $ 100
</TABLE>
The Fund may waive or reduce these amounts for:
. Employees of PaineWebber or its affiliates; or
. Participants in certain pension plans, retirement accounts,
unaffiliated investment programs or the Fund's automatic investment
plans.
Frequent Trading. The interests of a Fund's long-term shareholders and its
ability to manage its investments may be adversely affected when its shares
are repeatedly bought and sold in response to short-term market fluctuations--
also known as "market timing." When large dollar amounts are involved, the
Fund may have difficulty implementing long-term investment strategies, because
it cannot predict how much cash it will have to invest. Market timing also may
force the Fund to sell portfolio securities at disadvantageous times to raise
the cash needed to buy a market timer's fund shares. These factors may hurt
the Fund's performance and its shareholders. When Mitchell Hutchins believes
frequent trading would have a disruptive effect on the Fund's ability to
manage its investments, Mitchell Hutchins and the Fund may reject purchase
orders and exchanges into the Fund by any person, group or account that
Mitchell Hutchins believes to be a market timer. The Fund may notify the
market timer that a purchase order or an exchange has been rejected after the
day the order is placed.
SELLING SHARES
You can sell your Fund shares at any time. If you own more than one class
of shares, you should specify which class you want to sell. If you do not, the
Fund will assume that you want to sell shares in the following order: Class A,
then Class C, then Class B and last, Class Y.
If you want to sell shares that you purchased recently, the Fund may delay
payment until it verifies that it has received good payment. If you purchased
shares by check, this can take up to 15 days.
If you have an account with PaineWebber or a PaineWebber correspondent
firm, you can sell shares by contacting your Financial Advisor.
If you do not have an account at PaineWebber or a correspondent firm, and
you bought your shares through the transfer agent, you can sell your shares by
writing to the Fund's transfer agent. Your letter must include:
. Your name and address;
. The Fund's name;
. The Fund account number;
. The dollar amount or number of shares you want to sell; and
15
<PAGE>
. A guarantee of each registered owner's signature. A signature
guarantee may be obtained from a financial institution, broker,
dealer or clearing agency that is a participant in one of the
medallion programs recognized by the Securities Transfer Agents
Association. These are: Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP) and the New York
Stock Exchange Medallion Signature Program (MSP). The Fund will not
accept signature guarantees that are not a part of these programs.
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
If you sell Class A shares and then repurchase Class A shares of the same
fund within 365 days of the sale, you can reinstate your account without paying
a sales charge.
It costs the Fund money to maintain shareholder accounts. Therefore, the
Fund reserves the right to repurchase all shares in any account that has a net
asset value of less than $500. If the Fund elects to do this with your account,
it will notify you that you can increase the amount invested to $500 or more
within 60 days. The Fund will not repurchase shares in accounts that fall below
$500 solely because of a decrease in the Fund's net asset value.
EXCHANGING SHARES
You may exchange Class A, Class B or Class C shares of the Fund for shares
of the same class of the other PACE funds or of PaineWebber Money Market Fund.
(It is expected that shareholders will also be able to exchange Class A, Class
B or Class C shares of a PACE fund for shares of the same class of certain
other PaineWebber mutual funds beginning on or about March 1, 2001.) You may
not exchange Class Y shares.
You will not pay either a front-end sales charge or a deferred sales charge
when you exchange shares. However, you may have to pay a deferred sales charge
if you later sell the shares you acquired in the exchange. The Fund will use
the date that you purchased the shares in the first fund to determine whether
you must pay a deferred sales charge when you sell the shares in the acquired
fund.
You may not be able to exchange your shares if your exchange is not as large
as the minimum investment amount in that other fund.
You may exchange shares of one fund for shares of another fund only after
the first purchase has settled and the first fund has received your payment.
PaineWebber and Correspondent Firm Clients. If you bought your shares through
PaineWebber or a correspondent firm, you may exchange your shares by placing an
order with your Financial Advisor.
Other Investors. If you are not a PaineWebber or correspondent firm client, you
may exchange your shares by writing to the Fund's transfer agent. You must
include:
. Your name and address;
. The name of the fund whose shares you are selling and the name of the
fund whose shares you want to buy;
. Your account number;
16
<PAGE>
. How much you are exchanging (by dollar amount or by number of shares
to be sold); and
. A guarantee of your signature. (See "Selling Shares" for information
on obtaining a signature guarantee.)
Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.
The Fund may modify or terminate the exchange privilege at any time.
PRICING AND VALUATION
The price at which you may buy, sell or exchange Fund shares is based on net
asset value per share. The Fund calculates net asset value on days that the New
York Stock Exchange, Inc. ("NYSE") is open. Each Fund calculates net asset
value separately for each class as of the close of regular trading on the NYSE
(generally, 4:00 p.m., Eastern time). The NYSE normally is not open on most
national holidays and on Good Friday, and the Fund does not price its shares on
these days. If trading on the NYSE is halted for the day before 4:00 p.m.,
Eastern time, the Fund's net asset value per share will be calculated as of the
time trading was halted.
Your price for buying, selling or exchanging shares will be based on the net
asset value that is next calculated after the Fund accepts your order. If you
place your order through PaineWebber, your PaineWebber Financial Advisor is
responsible for making sure that your order is promptly sent to the Fund.
You should keep in mind that a front-end sales charge may be applied to your
purchase if you buy Class A shares. A deferred sales charge may be applied when
you sell Class B or Class C shares.
The Fund calculates its net asset value based on the current market value
for its portfolio securities. The Fund normally obtains market values for its
securities from independent pricing services that use reported last sales
prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. If a market value is
not available from an independent pricing source for a particular security,
that security is valued at a fair value determined by or under the direction of
the Fund's board. The Fund normally uses the amortized cost method to value
bonds that will mature in 60 days or less.
Judgment plays a greater role in valuing thinly traded securities, including
many lower-rated bonds, because there is less reliable, objective data
available.
The Fund calculates the U.S. dollar value of investments that are
denominated in foreign currencies daily, based on current exchange rates. The
Fund may own securities, including some securities that trade primarily in
foreign markets, that trade on weekends or other days on which the fund does
not calculate net asset value. As a result, the Fund's net asset value may
change on days when you will not be able to buy and sell Fund shares. If the
Fund concludes that a material change in the value of a foreign security has
occurred after the close of trading in the principal foreign market but before
the close of the NYSE, the Fund may use fair value methods to reflect those
changes. This policy is intended to assure that the Fund's net asset value
fairly reflects security values as of the time of pricing.
17
<PAGE>
MANAGEMENT
INVESTMENT MANAGER AND INVESTMENT ADVISER
Mitchell Hutchins serves as the investment manager or investment adviser and
as administrator of both Funds. Mitchell Hutchins is located at 51 West 52nd
Street, New York, New York 10019-6114, and is a wholly owned asset management
subsidiary of PaineWebber Incorporated, which is a wholly owned indirect
subsidiary of UBS AG. UBS AG, with headquarters in Zurich, Switzerland, is an
internationally diversified organization with operations in many areas of the
financial services industry. On October 31, 2000, Mitchell Hutchins was adviser
or sub-adviser of 31 investment companies with 75 separate portfolios and
aggregate assets of approximately $58.3 billion.
As investment manager for PACE International Emerging Markets Equity Fund,
Mitchell Hutchins recommends sub-advisers to the Board of PACE Trust to manage
the Fund's investments and monitors and reviews the performance of those sub-
advisers. PACE Trust has received an exemptive order from the SEC to permit
Mitchell Hutchins (subject to Board approval) to select and replace sub-
advisers and to amend the sub-advisory contracts between Mitchell Hutchins and
the sub-advisers without obtaining shareholder approval.
As investment adviser for Asia Pacific Growth Fund, Mitchell Hutchins
recommends sub-advisers to the Board of Managed Investments Trust and monitors
and reviews the performance of those sub-advisers.
SUB-ADVISER
SIMNA manages the assets of each Fund. SIMNA is located at 787 Seventh
Avenue, New York, New York 10019. SIMNA and its affiliates have developed an
expertise in emerging markets investments. As of June 30, 2000, SIMNA had
approximately $46 billion in assets under management. As of the same date,
SIMNA's ultimate parent, Schroders plc, and its affiliates collectively had
approximately $217 billion in assets under management.
All investment decisions for PACE International Emerging Markets Equity Fund
are made by SIMNA's emerging markets investment committee. The investment
committee consists of investment professionals with specific geographic or
regional expertise, as well as members responsible for economic analysis and
strategy and global stock and sector selection.
ADVISORY FEES AND FUND EXPENSES
PACE International Emerging Markets Equity Fund pays fees to Mitchell
Hutchins for management and administrative services at the combined annual
contract rate of 1.10% of average daily net assets. This combined fee includes
an annual contract rate of 0.90% for investment management services and 0.20%
for administrative services, both expressed as a percentage of the Fund's
average daily net assets. During the fiscal year ended July 31, 2000, PACE
International Emerging Markets Equity Fund paid Mitchell Hutchins at the lower
effective rate of 0.85% of the Fund's average daily net assets because Mitchell
Hutchins waived a portion of its fee. Asia Pacific Growth Fund paid fees to
Mitchell Hutchins for investment advisory and administrative services for the
Fund's fiscal year ended October 31, 1999 at the annual rate of 1.20% of the
Fund's average daily net assets.
Mitchell Hutchins anticipates that shareholders of each class of shares of
Asia Pacific Growth Fund who will become shareholders of the corresponding
class of shares of PACE International Emerging Markets Equity Fund will be
subject to total annual operating expenses that are lower than the expenses
they currently pay as shareholders of Asia Pacific Growth Fund due to economies
of scale and the lower management fee paid by PACE International Emerging
Markets Equity Fund to Mitchell Hutchins. The overall operating expenses of
PACE International Emerging Markets Equity Fund are also subject to a written
management fee waiver and expense reimbursement agreement between the Fund and
Mitchell Hutchins, which will remain in effect through December 1, 2002. Even
absent that agreement, however, it is expected that the overall operating
expenses for
18
<PAGE>
each class of shares of the combined Fund would be lower than the current
expenses of the corresponding class of shares of Asia Pacific Growth Fund.
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION
REASONS FOR THE REORGANIZATION
Managed Investments Trust's Board approved the proposed Reorganization at a
meeting held on October 6, 2000. As described more fully below, the Board and
Mitchell Hutchins believe that Asia Pacific Growth Fund's most attractive and
significant feature for its shareholders is the Fund's investment in stocks of
companies in emerging market countries. The Board and Mitchell Hutchins
concluded that the Fund's shareholders would benefit from the Reorganization
because the combined Fund would have a larger asset base to invest in stocks
of companies in emerging market countries and would have lower expenses. The
Board and Mitchell Hutchins also noted that Asia Pacific Growth Fund's
relatively small and declining asset base may make it increasingly difficult
to manage efficiently and could adversely affect the Fund's prospects for
successful performance over the long term.
At the meeting of Managed Investments Trust's Board on October 6, 2000 and
in a series of prior meetings and presentations, Mitchell Hutchins explained
to the Board that it had undertaken an extensive review of whether the best
interests of shareholders of a number of PaineWebber funds, including Asia
Pacific Growth Fund, would be served by continuing to operate the funds under
their current arrangements. For Asia Pacific Growth Fund, Mitchell Hutchins'
review included a possible reorganization into another PaineWebber fund.
Mitchell Hutchins noted that the assets of Asia Pacific Growth Fund, which
commenced operations in March 1997, have never exceeded $[ ] million and
have been relatively flat or declining over the past [ ] months. As of
November 30, 2000, the Fund's net assets were approximately $[ ] million. As
a result of these relatively low and declining asset levels, the Fund has been
difficult to manage efficiently and its expenses have remained relatively
high.
Mitchell Hutchins also noted that PACE International Emerging Markets
Equity Fund and Asia Pacific Growth Fund have similar investment objectives in
that each seeks capital appreciation. Mitchell Hutchins also noted that both
Funds invest in stocks of companies in emerging market countries and that each
Fund's assets have been managed since its inception by SIMNA. Mitchell
Hutchins pointed out, however, that there are significant differences in the
two Fund's investment policies. Asia Pacific Growth Fund invests primarily in
stocks of companies in the Asia Pacific Region (other than Japan), including
stocks of companies in developed and emerging market countries within that
region. PACE International Emerging Markets Equity Fund invests primarily in
stocks of companies in emerging market countries and is not limited to any one
geographic region. Although the universe of potential investments is thus
different for the two Funds, SIMNA applies the same basic investment
strategies in deciding which stocks to buy or sell for the two Funds. (See
"Comparison of the Funds" above for a more complete description of the
investment objectives, policies and risks of each Fund.)
Mitchell Hutchins stated its belief that the Asia Pacific Growth Fund's
most attractive and significant feature for its shareholders was its
investment in companies in emerging markets. As a result, Mitchell Hutchins
believed that the proposed Reorganization would likely benefit Asia Pacific
Growth Fund's shareholders because the combined Fund would have a larger asset
base to invest in these securities and thus greater opportunities to diversify
investments. Mitchell Hutchins noted that the combined Fund also would have
lower expenses. Mitchell Hutchins also stated its belief that the
Reorganization would not materially adversely affect the shareholders of Asia
Pacific Growth Fund notwithstanding the differences in the two Fund's
investment policies.
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<PAGE>
Mitchell Hutchins noted that the investment management and administration
fee currently paid by PACE International Emerging Markets Equity Fund is less
than that currently paid by Asia Pacific Growth Fund. In addition, Mitchell
Hutchins informed the Board of Managed Investments Trust that it anticipated
that current shareholders of each class of shares of Asia Pacific Growth Fund
who will become shareholders of PACE International Emerging Markets Equity Fund
if the Reorganization is approved will be subject to total annual operating
expenses that are lower than the expenses they currently pay as shareholders of
Asia Pacific Growth Fund due to economies of scale and the lower management fee
of PACE International Emerging Markets Equity Fund. While the overall operating
expenses of PACE International Emerging Markets Equity Fund are subject to a
written management fee waiver and expense reimbursement agreement between the
Fund and Mitchell Hutchins, which will remain in effect through December 1,
2002, Mitchell Hutchins noted that the overall operating expenses of the
combined Fund would be lower than the current expenses of Asia Pacific Growth
Fund even without this agreement. (See "Comparative Fee Table" above for a more
complete description of the fees and expenses of the Funds, both before and
after the Reorganization.)
Mitchell Hutchins also noted that PACE International Emerging Markets Equity
Fund has the additional flexibility to change its sub-adviser or add additional
sub-advisers when Mitchell Hutchins and the Board of PACE Trust decide, without
the cost or delay of needing first to obtain approval by a vote of the
shareholders of PACE International Emerging Markets Equity Fund.
Finally, Mitchell Hutchins reviewed with the Board of Managed Investments
Trust the principal terms of the Plan. Mitchell Hutchins informed the Board
that the Reorganization would be tax-free to Asia Pacific Growth Fund and its
shareholders, that shareholders of the combined Fund after the Reorganization
could continue to exchange into other PaineWebber open-end funds without having
to pay an additional sales load should their investment priorities change, and
that no sales charges would be imposed on any PACE International Emerging
Markets Equity Fund shares issued in connection with the Reorganization.
Furthermore, Mitchell Hutchins informed the Board of Managed Investments Trust
that, for purposes of calculating the contingent deferred sales charge, the
holding period for the Class B and Class C shares distributed to Class B and
Class C shareholders of Asia Pacific Growth Fund will include the holding
period for the shares of Asia Pacific Growth Fund and any other PaineWebber
fund shares of the same class that were exchanged for shares of Asia Pacific
Growth Fund.
As part of its consideration, the Board of Managed Investments Trust
examined a number of factors with respect to the Reorganization, including: (1)
the compatibility of the Funds' investment objectives, policies and
restrictions; (2) the Funds' respective investment performances; (3) the likely
impact of the Reorganization on the expense ratio of PACE International
Emerging Markets Equity Fund and that expense ratio relative to Asia Pacific
Growth Fund's current expense ratio; (4) that Mitchell Hutchins would bear the
costs of the Reorganization; (5) the compatibility of the Funds' portfolio
holdings and the effect on Asia Pacific Growth Fund and its shareholders of any
realignment of its portfolio in connection with the Reorganization; (6) the tax
consequences of the Reorganization; (7) the potential benefits of the
Reorganization to other persons, including Mitchell Hutchins and its
affiliates; (8) Mitchell Hutchins' assessment that the proposed Reorganization
will be beneficial to the shareholders of Asia Pacific Growth Fund and will not
dilute their interests; (9) the advisory arrangements in place for the Funds
and the level and quality of investment advisory services provided or to be
provided by Mitchell Hutchins and SIMNA; and (10) the terms of the proposed
Plan.
On the basis of the information provided to it and its evaluation of that
information, the Board of Managed Investments Trust, including a majority of
its Independent Trustees, determined that the Reorganization would be in the
best interests of Asia Pacific Growth Fund and that the interests of existing
Asia Pacific Growth Fund shareholders will not be diluted as a result of the
Reorganization. THEREFORE, THE BOARD OF MANAGED INVESTMENTS TRUST UNANIMOUSLY
APPROVED THE REORGANIZATION AND RECOMMENDED THE APPROVAL OF THE PLAN BY THE
SHAREHOLDERS OF ASIA PACIFIC GROWTH FUND AT THE MEETING.
20
<PAGE>
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Plan. Significant provisions of the Plan are summarized
below; however, this summary is qualified in its entirety by reference to the
Plan, a copy of the form of which is attached as Appendix A to this Proxy
Statement/Prospectus.
The Plan contemplates (1) PACE International Emerging Markets Equity Fund's
acquiring on the Closing Date all the assets of Asia Pacific Growth Fund in
exchange solely for PACE International Emerging Markets Equity Fund shares and
PACE International Emerging Markets Equity Fund's assumption of all of Asia
Pacific Growth Fund's stated liabilities and (2) the distribution of those
shares to Asia Pacific Growth Fund shareholders. Asia Pacific Growth Fund's
assets include all cash, cash equivalents, securities, receivables (including
interest and dividends receivable), claims and rights of action, rights to
register shares under applicable securities laws, books and records, deferred
and prepaid expenses shown as assets on its books and other property owned by
it as of the close of business on the Closing Date ("Effective Time")
(collectively, the "Assets"). PACE International Emerging Markets Equity Fund
will assume from Asia Pacific Growth Fund all its liabilities, debts,
obligations and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, and whether or not specifically referred to in the Plan, but only to
the extent disclosed or provided for in Asia Pacific Growth Fund's most recent
annual and semi-annual financial statements, or incurred by Asia Pacific
Growth Fund subsequent to the date of those financial statements and disclosed
in writing to and accepted by PACE Trust (collectively, the "Liabilities").
Asia Pacific Growth Fund agreed in the plan to use its best efforts to
discharge all of its known Liabilities prior to the Effective Time.
The value of the Assets to be acquired, and the amount of the Liabilities
to be assumed, by PACE International Emerging Markets Equity Fund and the NAV
per share of each class of PACE International Emerging Markets Equity Fund
shares will be determined as of the close of regular trading on the NYSE on
the Closing Date ("Valuation Time"), using the applicable valuation procedures
described in PACE International Emerging Markets Equity Fund's then-current
Prospectus and SAI. These procedures are identical to those used by Asia
Pacific Growth Fund and described in its current Prospectus and SAI. Asia
Pacific Growth Fund's NAV will be the value of the Assets to be acquired by
PACE International Emerging Markets Equity Fund, less the amount of the
Liabilities, as of the Valuation Time.
On, or as soon as practicable after, the Closing Date, Asia Pacific Growth
Fund will distribute to its shareholders of record as of the Effective Time
the PACE International Emerging Markets Equity Fund shares it receives, by
class, so that each Asia Pacific Growth Fund shareholder will receive the
number of full and fractional shares of the corresponding class of PACE
International Emerging Markets Equity Fund equal in aggregate NAV to the
shareholder's shares in Asia Pacific Growth Fund. That distribution will be
accomplished by opening accounts on the books of PACE International Emerging
Markets Equity Fund in the names of Asia Pacific Growth Fund's shareholders
and crediting those accounts with the appropriate number of PACE International
Emerging Markets Equity Fund shares. Fractional shares of PACE International
Emerging Markets Equity Fund will be rounded to the third decimal place.
The NAV per share of PACE International Emerging Markets Equity Fund will
not change as a result of the Reorganization. Thus, the Reorganization will
not result in a dilution of the interest of any shareholder in either Fund. In
addition, Mitchell Hutchins (not the Funds) will bear the expenses of the
Reorganization. Emerging Markets Fund will be terminated after the
Reorganization.
The consummation of the Reorganization is subject to a number of conditions
set forth in the Plan, some of which may be waived by either Fund. In
addition, the Plan may be amended in any mutually agreeable manner, except
that no amendment may be made subsequent to the Meeting that would have a
material adverse effect on the interests of Asia Pacific Growth Fund
shareholders. If the Reorganization is not approved by shareholders at the
Meeting, Asia Pacific Growth Fund will continue to operate as a series of
Managed Investments Trust, and its Board will then consider other options and
alternatives for the future of the Fund, including the liquidation of the
Fund, resubmitting this proposal for shareholder approval or other appropriate
action.
21
<PAGE>
DESCRIPTION OF SECURITIES TO BE ISSUED
PACE International Emerging Markets Equity Fund is authorized to issue an
unlimited amount of shares of beneficial interest, par value $0.001 per share.
The Fund's shares are divided into five classes, designated Class A, Class B,
Class C, Class Y and Class P shares. Class P shares are not involved in the
Reorganization. A share of each class of PACE International Emerging Markets
Equity Fund represents an identical interest in the Fund's investment portfolio
and has the same rights, privileges and preferences. Each share of the Fund is
entitled to participate equally in dividends and other distributions of the
Fund, except that dividends and other distributions will appropriately reflect
expenses allocated to a particular class. Shares of PACE International Emerging
Markets Equity Fund entitle their holders to one vote per full share and
fractional votes for fractional shares held. PACE Trust does not hold annual
meetings. Shares of the Fund generally are voted together, except that only the
shareholders of a particular class of the Fund may vote on matters affecting
only that class, such as the terms of a Rule 12b-1 Plan as it relates to the
class. Shares of each series of PACE Trust will be voted separately, except
when an aggregate vote of all the series is required by law.
TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS
Certain fundamental investment restrictions of Asia Pacific Growth Fund,
which prohibit it from acquiring more than a stated percentage of ownership of
another company, might be construed as restricting its ability to carry out the
Reorganization. By approving the Plan, you agree to waive, only for the purpose
of the Reorganization, those fundamental investment restrictions that could
prohibit or otherwise impede the transaction.
FEDERAL INCOME TAX CONSIDERATIONS
The Reorganization is intended to be a tax-free reorganization within the
meaning of section 368(a)(1)(C) of the Code. Managed Investments Trust and PACE
Trust will each receive an opinion of Kirkpatrick & Lockhart LLP, counsel to
Managed Investments Trust and tax counsel to PACE Trust, substantially to the
following effect:
(1) PACE International Emerging Markets Equity Fund's acquisition of the
Assets in exchange solely for its shares and its assumption of the
Liabilities, followed by Asia Pacific Growth Fund's distribution of those
shares pro rata to its shareholders constructively in exchange for their
Asia Pacific Growth Fund shares, will qualify as a reorganization within
the meaning of section 368(a)(1)(C) of the Code, and each Fund will be "a
party to a reorganization" within the meaning of section 368(b) of the
Code;
(2) Asia Pacific Growth Fund will recognize no gain or loss on its
transfer of the Assets to PACE International Emerging Markets Equity Fund
in exchange solely for PACE International Emerging Markets Equity Fund
shares and PACE International Emerging Markets Equity Fund's assumption of
the Liabilities or on the subsequent distribution of those shares to Asia
Pacific Growth Fund's shareholders in constructive exchange for their Asia
Pacific Growth Fund shares;
(3) PACE International Emerging Markets Equity Fund will recognize no
gain or loss on its receipt of the Assets in exchange solely for its shares
and its assumption of the Liabilities;
(4) PACE International Emerging Markets Equity Fund's basis in the
Assets will be the same as Asia Pacific Growth Fund's basis therein
immediately before the Reorganization, and PACE International Emerging
Markets Equity Fund's holding period for the Assets will include Asia
Pacific Growth Fund's holding period therefor;
(5) An Asia Pacific Growth Fund shareholder will recognize no gain or
loss on the constructive exchange of all its Asia Pacific Growth Fund
shares solely for PACE International Emerging Markets Equity Fund shares
pursuant to the Reorganization; and
22
<PAGE>
(6) An Asia Pacific Growth Fund shareholder's aggregate basis in the
PACE International Emerging Markets Equity Fund shares it receives in the
Reorganization will be the same as the aggregate basis for its Asia Pacific
Growth Fund shares it constructively surrenders in exchange for those PACE
International Emerging Markets Equity Fund shares, and its holding period
for those PACE International Emerging Markets Equity Fund shares will
include its holding period for those Asia Pacific Growth Fund shares,
provided the shareholder holds them as capital assets on the Closing Date.
The opinion may state that no opinion is expressed as to the effect of the
Reorganization on the Funds or any shareholder with respect to any asset as to
which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Utilization by PACE International Emerging Markets Equity Fund after the
Reorganization of any pre-Reorganization capital losses realized by Asia
Pacific Growth Fund could be subject to limitation in future years under the
Code.
You should consult your tax adviser regarding the effect, if any, of the
Reorganization in light of your individual circumstances. Because the foregoing
discussion only relates to the federal income tax consequences of the
Reorganization, you also should consult your tax adviser as to state and local
tax consequences, if any, of the Reorganization.
REQUIRED VOTE
The proposal to approve the Plan requires the affirmative vote of the lesser
of (1) 67% or more of the shares of Asia Pacific Growth Fund present at the
Meeting, if more than 50% of the outstanding shares are represented at the
Meeting in person or by proxy, or (2) more than 50% of the outstanding shares
entitled to vote at the Meeting.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.
----------------
ORGANIZATION OF THE FUNDS
PACE International Emerging Markets Equity Fund commenced operations on
August 24, 1995 as a diversified series of PACE Trust. PACE Trust was organized
as a Delaware business trust on September 9, 1994, and is registered under the
1940 Act as an open-end management investment company. The operations of PACE
Trust, as a Delaware business trust, are governed by its Trust Instrument, By-
Laws and Delaware law.
Asia Pacific Growth Fund commenced operations on March 25, 1997 as a
diversified series of Managed Investments Trust. Managed Investments Trust was
organized as a Massachusetts business trust on November 21, 1986, and is
registered under the 1940 Act as an open-end management investment company. The
operations of Managed Investments Trust, as a Massachusetts business trust, are
governed by its Amended and Restated Declaration of Trust, Amended and Restated
By-Laws and Massachusetts law.
23
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights table is intended to help you understand
PACE International Emerging Markets Equity Fund's financial performance for
the periods shown. The table shows information for the Fund's Class P shares
because they were the only class of shares outstanding during the periods
shown. Certain information reflects financial results for a single Fund share.
In the tables, "total investment return" represents the rate that an investor
would have earned (or lost) on an investment in the Fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by Ernst & Young LLP, independent auditors for PACE International
Emerging Markets Equity Fund, whose report, along with the Fund's financial
statements, is included in the Fund's Annual Report to Shareholders, dated
July 31, 2000, which may be obtained without charge by calling 1-800-647-1568.
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout
each period is presented below:
<TABLE>
<CAPTION>
PACE INTERNATIONAL EMERGING MARKETS EQUITY
INVESTMENTS
--------------------------------------------------
FOR THE YEARS ENDED
JULY 31, FOR THE PERIOD
---------------------------------- ENDED JULY 31,
2000 1999 1998 1997 1996+
------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 12.05 $ 10.41 $ 15.60 $ 12.49 $ 12.00
------- ------- ------- ------- -------
Net investment income
(loss)..................... (0.01) 0.09 0.09 0.06 0.07
Net realized and unrealized
gains (losses) from
investments and foreign
currency................... 0.02 1.62 (5.23) 3.09 0.44
------- ------- ------- ------- -------
Net increase (decrease) from
investment operations...... 0.01 1.71 (5.14) 3.15 0.51
------- ------- ------- ------- -------
Dividends from net
investment income.......... (0.10) (0.07) (0.05) (0.04) (0.02)
------- ------- ------- ------- -------
Net asset value, end of
period..................... $ 11.96 $ 12.05 $ 10.41 $ 15.60 $ 12.49
======= ======= ======= ======= =======
Total investment return
(1)........................ (0.02)% 16.66% (32.99)% 25.31% 4.23%
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's).................... $82,179 $88,497 $63,237 $54,759 $25,481
Expenses to average net
assets, net of fee waivers
and expense
reimbursements............. 1.50% 1.50% 1.50% 1.50% 1.50%*
Expenses to average net
assets, before fee waivers
and expense
reimbursements............. 1.75% 1.79% 1.79% 2.09% 2.35%*
Net investment income (loss)
to average net assets, net
of fee waivers and expense
reimbursements............. (0.08)% 1.05% 0.98% 0.63% 0.94%*
Net investment income (loss)
to average net assets,
before fee waivers and
expense reimbursements..... (0.33)% 0.76% 0.69% 0.04% 0.08%*
Portfolio turnover.......... 115% 66% 51% 39% 22%
</TABLE>
----------------
+ For the period August 24, 1995 (commencement of operations) through July
31, 1996.
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable sales charges or program fees; results would be lower
if they were included. Total investment return for period of less than one
year has not been annualized.
24
<PAGE>
CAPITALIZATION
The following table shows the capitalization of each of Asia Pacific Growth
Fund and PACE International Emerging Markets Equity Fund as of July 31, 2000,
and the pro forma capitalization as of the same date, assuming that
shareholders of Asia Pacific Growth Fund and PaineWebber Emerging Markets
Equity Fund approve the reorganizations with PACE International Emerging
Markets Equity Fund:
<TABLE>
<CAPTION>
ASIA PRO FORMA CLASS A
PACIFIC PACE INTERNATIONAL COMBINED PACE
GROWTH EMERGING MARKETS INTERNATIONAL
FUND: EQUITY FUND: EMERGING MARKETS
CLASS A CLASS A EQUITY FUND
----------- ------------------ -----------------
<S> <C> <C> <C>
Net Assets.................... $11,417,306 $ 0 $15,529,960
Shares Outstanding............ 1,083,405 0 1,298,204
Net Asset Value Per Share..... $ 10.54 $ 0 $ 11.96
<CAPTION>
ASIA PRO FORMA CLASS B
PACIFIC PACE INTERNATIONAL COMBINED PACE
GROWTH EMERGING MARKETS INTERNATIONAL
FUND: CLASS EQUITY FUND: EMERGING MARKETS
B CLASS B EQUITY FUND
----------- ------------------ -----------------
<S> <C> <C> <C>
Net Assets.................... $12,724,670 $ 0 $13,517,544
Shares Outstanding............ 1,238,468 0 1,129,958
Net Asset Value Per Share..... $ 10.27 $ 0 $ 11.96
<CAPTION>
ASIA PRO FORMA CLASS C
PACIFIC PACE INTERNATIONAL COMBINED PACE
GROWTH EMERGING MARKETS INTERNATIONAL
FUND: CLASS EQUITY FUND: EMERGING MARKETS
C CLASS C EQUITY FUND
----------- ------------------ -----------------
<S> <C> <C> <C>
Net Assets.................... $ 5,936,554 $ 0 $ 7,834,434
Shares Outstanding............ 577,174 0 654,823
Net Asset Value Per Share..... $ 10.29 $ 0 $ 11.96
<CAPTION>
ASIA PRO FORMA CLASS Y
PACIFIC PACE INTERNATIONAL COMBINED PACE
GROWTH EMERGING MARKETS INTERNATIONAL
FUND: CLASS EQUITY FUND: EMERGING MARKETS
Y CLASS Y EQUITY FUND
----------- ------------------ -----------------
<S> <C> <C> <C>
Net Assets.................... $ 218,739 $ 0 $ 961,589
Shares Outstanding............ 20,779 0 80,387
Net Asset Value Per Share..... $ 10.53 $ 0 $ 11.96
<CAPTION>
ASIA PRO FORMA CLASS P
PACIFIC PACE INTERNATIONAL COMBINED PACE
GROWTH EMERGING MARKETS INTERNATIONAL
FUND: CLASS EQUITY FUND: EMERGING MARKETS
P CLASS P EQUITY FUND
----------- ------------------ -----------------
<S> <C> <C> <C>
Net Assets.................... $ 0 $82,178,513 $82,178,513
Shares Outstanding............ 0 6,869,421 6,869,421
Net Asset Value Per Share..... $ 0 $ 11.96 $ 11.96
</TABLE>
25
<PAGE>
LEGAL MATTERS
Certain legal matters concerning the issuance of PACE International
Emerging Markets Equity Fund shares as part of the Reorganization will be
passed upon by Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New
York 10019-6099, counsel to PACE Trust. Certain legal matters concerning the
tax consequences of the Reorganization will be passed upon by Kirkpatrick &
Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second Floor, Washington, D.C.
20036-1800.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PACE Trust and Managed Investments Trust are each subject to the
information requirements of the Securities Exchange Act of 1934 and the 1940
Act and in accordance therewith each files reports and other information with
the SEC. Reports, proxy statements, registration statements and other
information may be inspected without charge and copied at the Public Reference
Room maintained by the SEC at 450 Fifth Street, N.W., Washington, DC 20549,
and at the following regional offices of the SEC: 7 World Trade Center, Suite
1300, New York, NY 10048, and 500 West Madison Street, 14th floor, Chicago, IL
60661. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-202-942-8090. The SEC maintains an internet
web site at http://www.sec.gov that contains information regarding PACE Trust
and Managed Investments Trust, and other registrants that file electronically
with the SEC. Copies of such material may also be obtained, after paying a
duplicating fee, from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington, DC,
20549, or by electronic request at the following e-mail address:
[email protected].
EXPERTS
The audited financial statements of Asia Pacific Growth Fund incorporated
by reference in the SAI have been audited by Ernst & Young LLP, independent
auditors, whose report thereon is included in Asia Pacific Growth Fund's
Annual Report to Shareholders for the fiscal year ended November 30, 1999. The
audited financial statements of PACE International Emerging Markets Equity
Fund incorporated by reference in the SAI for the fiscal year ended July 31,
2000, have been audited by Ernst & Young LLP, independent auditors, whose
report thereon is included in PACE International Emerging Markets Equity
Fund's Annual Report to Shareholders for the fiscal year ended July 31, 2000.
The financial statements audited by Ernst & Young LLP have been incorporated
by reference in the SAI in reliance on its report given on its authority as
experts in auditing and accounting.
OTHER INFORMATION
Shareholder Proposals. As a general matter, Managed Investments Trust does
not hold regular annual or other meetings of shareholders. Any shareholder who
wishes to submit proposals to be considered at a special meeting of Asia
Pacific Growth Fund's shareholders should send such proposals to Asia Pacific
Growth Fund at 51 West 52nd Street, New York, New York 10019-6114. Proposals
must be received a reasonable period of time prior to any meeting to be
included in the proxy materials or presented at the meeting. Moreover,
inclusion or presentation of such proposals is subject to limitations under
the federal securities laws. Persons named as proxies for any subsequent
shareholders' meeting will vote in their discretion with respect to proposals
presented on an untimely basis.
Other Business. Managed Investments Trust's management knows of no other
business to be presented to the Meeting other than the matters set forth in
this Proxy Statement/Prospectus, but should any other matter requiring a vote
of Asia Pacific Growth Fund's shareholders arise, the proxies will vote
thereon according to their best judgment in the interests of the Fund.
26
<PAGE>
APPENDIX A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
This Agreement and Plan of Reorganization and Termination ("Agreement") is
made as of , 2001, by and among PaineWebber PACE Select Advisors Trust, a
Delaware business trust ("PACE Trust"), on behalf of PACE International
Emerging Markets Equity Investments, a segregated portfolio of assets
("series") thereof ("Acquiring Fund"), PaineWebber Managed Investments Trust,
a Massachusetts business trust ("Target Trust"), on behalf of PaineWebber Asia
Pacific Growth Fund, a series thereof ("Target"), and solely for purposes of
paragraph 7.2 hereof, Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"). (Acquiring Fund and Target are sometimes referred to herein
individually as a "Fund" and collectively as the "Funds," and PACE Trust and
Target Trust are sometimes referred to herein individually as an "Investment
Company" and collectively as the "Investment Companies.") All agreements,
representations, actions, and obligations described herein made or to be taken
or undertaken by Acquiring Fund or Target are made and shall be taken or
undertaken by PACE Trust or Target Trust, respectively.
The Investment Companies wish to effect a reorganization described in
section 368(a)(1) of the Internal Revenue Code of 1986, as amended ("Code"),
and intend this Agreement to be, and adopt it as, a "plan of reorganization"
within the meaning of the regulations under section 368 of the Code
("Regulations"). The reorganization will involve the transfer of Target's
assets to Acquiring Fund in exchange solely for voting shares of beneficial
interest in Acquiring Fund and the assumption by Acquiring Fund of Target's
stated liabilities, followed by the constructive distribution of those shares
pro rata to the holders of shares of beneficial interest in Target ("Target
Shares") in exchange therefor, all on the terms and conditions set forth
herein. The foregoing transactions are referred to herein collectively as the
"Reorganization."
The Target Shares are divided into four classes, designated Class A, Class
B, Class C, and Class Y shares ("Class A Target Shares," "Class B Target
Shares," "Class C Target Shares," and "Class Y Target Shares," respectively).
Acquiring Fund's shares are divided into five classes, four of which also are
designated Class A, Class B, Class C, and Class Y shares ("Class A Acquiring
Fund Shares," "Class B Acquiring Fund Shares," "Class C Acquiring Fund
Shares," and "Class Y Acquiring Fund Shares," respectively, and collectively
"Acquiring Fund Shares"). Each class of Acquiring Fund Shares is substantially
similar to the identically designated class of Target Shares.
In consideration of the mutual promises contained herein, the parties agree
as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor--
(a) to issue and deliver to Target the number of full and fractional
(rounded to the third decimal place) (i) Class A Acquiring Fund
Shares determined by dividing the net value of Target (computed as
set forth in paragraph 2.1) ("Target Value") attributable to the
Class A Target Shares by the net asset value ("NAV") of a Class A
Acquiring Fund Share (computed as set forth in paragraph 2.2),
(ii) Class B Acquiring Fund Shares determined by dividing the
Target Value attributable to the Class B Target Shares by the NAV
of a Class B Acquiring Fund Share (as so computed), (iii) Class C
Acquiring Fund Shares determined by dividing the Target Value
attributable to the Class C Target Shares by the NAV of a Class C
Acquiring Fund Share (as so computed), and (iv) Class Y Acquiring
Fund Shares determined by dividing the Target Value attributable
to the Class Y Target Shares by the NAV of a Class Y Acquiring
Fund Share (as so computed), and
(b) to assume all of Target's stated liabilities described in
paragraph 1.3 ("Liabilities").
A-1
<PAGE>
Such transactions shall take place at the Closing (as defined in paragraph
3.1).
1.2. The Assets shall include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights
of action, rights to register shares under applicable securities laws, books
and records, deferred and prepaid expenses shown as assets on Target's books,
and other property owned by Target at the Effective Time (as defined in
paragraph 3.1).
1.3. The Liabilities shall include all of Target's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, and whether or not specifically referred to in this Agreement, but
only to the extent disclosed or provided for in Target Trust's financial
statements referred to in paragraph 4.1.18, or otherwise disclosed in writing
to and accepted by PACE Trust. Notwithstanding the foregoing, Target agrees to
use its best efforts to discharge all its Liabilities before the Effective
Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount
large enough so that it will have distributed substantially all (and in any
event not less than 90%) of its investment company taxable income (computed
without regard to any deduction for dividends paid) and substantially all of
its realized net capital gain, if any, for its current taxable year through
the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by PACE Trust's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited
with the respective pro rata number of full and fractional (rounded to the
third decimal place) Acquiring Fund Shares due that Shareholder, by class
(i.e., the account for a Shareholder of Class A Target Shares shall be
credited with the respective pro rata number of Class A Acquiring Fund Shares
due that Shareholder; the account for a Shareholder of Class B Target Shares
shall be credited with the respective pro rata number of Class B Acquiring
Fund Shares due that Shareholder; the account for a Shareholder of Class C
Target Shares shall be credited with the respective pro rata number of Class C
Acquiring Fund Shares due that Shareholder; and the account for a Shareholder
of Class Y Target Shares shall be credited with the respective pro rata number
of Class Y Acquiring Fund Shares due that Shareholder). All outstanding Target
Shares, including any represented by certificates, shall simultaneously be
canceled on Target's share transfer books. Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares issued in connection with
the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months
after the Effective Time, Target shall be terminated as a series of Target
Trust and any further actions shall be taken in connection therewith as
required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable on issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New
York Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in Acquiring Fund's then-current
prospectus and statement of additional information ("SAI"), less (b) the
amount of the Liabilities as of the Valuation Time.
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2.2. For purposes of paragraph 1.1(a), the NAV of each class of Acquiring
Fund Shares shall be computed as of the Valuation Time, using the valuation
procedures set forth in Acquiring Fund's then-current prospectus and SAI.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Mitchell Hutchins.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on or about
February 9, 2001, or at such other place and/or on such other date as to which
the Investment Companies may agree. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the date
thereof or at such other time as to which the Investment Companies may agree
("Effective Time"). If, immediately before the Valuation Time, (a) the NYSE is
closed to trading or trading thereon is restricted or (b) trading or the
reporting of trading on the NYSE or elsewhere is disrupted, so that accurate
appraisal of the Target Value and the NAV of each class of Acquiring Fund
Shares is impracticable, the Effective Time shall be postponed until the first
business day after the day when such trading shall have been fully resumed and
such reporting shall have been restored.
3.2. Target Trust's fund accounting and pricing agent shall deliver at the
Closing a certificate of an authorized officer verifying that the information
(including adjusted basis and holding period, by lot) concerning the Assets,
including all portfolio securities, transferred by Target to Acquiring Fund,
as reflected on Acquiring Fund's books immediately after the Closing, does or
will conform to such information on Target's books immediately before the
Closing. Target Trust's custodian shall deliver at the Closing a certificate
of an authorized officer stating that the Assets held by the custodian will be
transferred to Acquiring Fund at, or arrangements for the transfer thereof to
Acquiring Fund will have been made on or before, the Effective Time.
3.3. Target Trust shall deliver to PACE Trust at the Closing a list of the
names and addresses of the Shareholders and the number of outstanding Target
Shares (by class) owned by each Shareholder (rounded to the third decimal
place), all as of the Effective Time, certified by Target Trust's Secretary or
an Assistant Secretary thereof. PACE Trust's transfer agent shall deliver at
the Closing a certificate as to the opening on Acquiring Fund's share transfer
books of accounts in the Shareholders' names. PACE Trust shall issue and
deliver a confirmation to Target Trust evidencing the Acquiring Fund Shares to
be credited to Target at the Effective Time or provide evidence satisfactory
to Target Trust that such Acquiring Fund Shares have been credited to Target's
account on Acquiring Fund's books. At the Closing, each Investment Company
shall deliver to the other bills of sale, checks, assignments, stock
certificates, receipts, or other documents the other Investment Company or its
counsel reasonably requests.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to
the effect that the representations and warranties it made in this Agreement
are true and correct at the Effective Time except as they may be affected by
the transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants to PACE Trust, on behalf of Acquiring
Fund, as follows:
4.1.1. Target Trust is a trust operating under a written declaration of
trust, the beneficial interest in which is divided into transferable shares
("Business Trust"), that is duly organized and validly existing under the
laws of the Commonwealth of Massachusetts; and a copy of its Amended and
Restated Declaration of Trust ("Declaration of Trust") is on file with the
Secretary of the Commonwealth of Massachusetts;
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4.1.2. Target Trust is duly registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
("1940 Act"), and such registration will be in full force and effect at the
Effective Time;
4.1.3. Target is a duly established and designated series of Target
Trust;
4.1.4. At the Closing, Target will have good and marketable title to the
Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets free of any liens or other encumbrances (except
securities that are subject to "securities loans" as referred to in section
851(b)(2) of the Code); and on delivery and payment for the Assets,
Acquiring Fund will acquire good and marketable title thereto;
4.1.5. Target's current prospectus and SAI conform in all material
respects to the applicable requirements of the Securities Act of 1933, as
amended ("1933 Act"), and the 1940 Act and the rules and regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated hereby
will not conflict with or violate, Massachusetts law or any provision of
the Declaration of Trust or Target Trust's By-Laws or of any agreement,
instrument, lease, or other undertaking to which Target is a party or by
which it is bound or result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Target is a party or by which it is bound, except as otherwise
disclosed in writing to and accepted by PACE Trust;
4.1.7. Except as otherwise disclosed in writing to and accepted by PACE
Trust, all material contracts and other commitments of or applicable to
Target (other than this Agreement and investment contracts, including
options, futures, and forward contracts) will be terminated, or provision
for discharge of any liabilities of Target thereunder will be made, at or
prior to the Effective Time, without either Fund's incurring any liability
or penalty with respect thereto and without diminishing or releasing any
rights Target may have had with respect to actions taken or omitted or to
be taken by any other party thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and accepted by PACE
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Target
Trust's knowledge) threatened against Target Trust with respect to Target
or any of its properties or assets that, if adversely determined, would
materially and adversely affect Target's financial condition or the conduct
of its business; and Target Trust knows of no facts that might form the
basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially or adversely affects its business or its ability to consummate
the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of Target Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders, this Agreement constitutes a valid and legally
binding obligation of Target, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and laws of general applicability relating to or affecting
creditors' rights and to general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
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4.1.11. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 Act"), or the 1940 Act for the execution or performance of
this Agreement by Target Trust, except for (a) the filing with the
Securities and Exchange Commission ("SEC") of a registration statement by
PACE Trust on Form N-14 relating to the Acquiring Fund Shares issuable
hereunder, and any supplement or amendment thereto ("Registration
Statement"), including therein a prospectus/proxy statement ("Proxy
Statement"), and (b) such consents, approvals, authorizations, and filings
as have been made or received or as may be required subsequent to the
Effective Time;
4.1.12. On the effective date of the Registration Statement, at the time
of the Meeting (as defined in paragraph 5.2), and at the Effective Time,
the Proxy Statement will (a) comply in all material respects with the
applicable provisions of the 1933 Act, the 1934 Act, and the 1940 Act and
the rules and regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by PACE Trust for use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business; and there are no Liabilities other than liabilities
disclosed or provided for in Target Trust's financial statements referred
to in paragraph 4.1.18, or otherwise disclosed to and accepted by PACE
Trust, none of which has been materially adverse to the business, assets,
or results of Target's operations;
4.1.14. Target is a "fund" as defined in section 851(g)(2) of the Code;
it qualified for treatment as a regulated investment company under
Subchapter M of the Code ("RIC") for each past taxable year since it
commenced operations and will continue to meet all the requirements for
such qualification for its current taxable year; the Assets will be
invested at all times through the Effective Time in a manner that ensures
compliance with the foregoing; and Target has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did
not apply to it;
4.1.15. Target is not under the jurisdiction of a court in a "title 11
or similar case" (within the meaning of section 368(a)(3)(A) of the Code);
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five or
fewer issuers;
4.1.17. Target's federal income tax returns, and all applicable state
and local tax returns, for all taxable years through and including the
taxable year ended October 31, 1999, have been timely filed and all taxes
payable pursuant to such returns have been timely paid;
4.1.18. Target Trust's audited financial statements for the year ended
October 31, 1999, and unaudited financial statements for the six months
ended April 30, 2000, to be delivered to PACE Trust, fairly represent
Target's financial position as of each such date and the results of its
operations and changes in its net assets for the periods then ended; and
4.1.19. Target's management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person "related"
(within the meaning of section 1.368-1(e)(3) of the Regulations) to either
Fund or (ii) any portion of the Acquiring Fund Shares to be received by
them in the Reorganization to any person related (within such meaning) to
Acquiring Fund, (b) does not anticipate dispositions of those Acquiring
Fund Shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of dispositions of shares of
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Target as a series of an open-end investment company, (c) expects that the
percentage of Shareholder interests, if any, that will be disposed of as a
result of or at the time of the Reorganization will be de minimis, and (d)
does not anticipate that there will be extraordinary redemptions of
Acquiring Fund Shares immediately following the Reorganization.
4.2. Acquiring Fund represents and warrants to Target Trust, on behalf of
Target, as follows:
4.2.1. PACE Trust is a business trust duly organized, validly existing,
and in good standing under the laws of the State of Delaware; and its
Certificate of Trust, including any amendments thereto ("Certificate of
Trust"), has been duly filed in the office of the Secretary of State
thereof;
4.2.2. PACE Trust is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
PACE Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for the
Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, including the receipt of
consideration in exchange therefor in excess of the par value thereof, will
be duly and validly issued and outstanding shares of Acquiring Fund, fully
paid and non-assessable;
4.2.6. Acquiring Fund's current prospectus and SAI conform in all
material respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations thereunder and do not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Delaware law or any
provision of PACE Trust's Certificate of Trust, Trust Instrument (including
any amendments thereto) ("Trust Instrument"), or By-Laws or of any
provision of any agreement, instrument, lease, or other undertaking to
which Acquiring Fund is a party or by which it is bound or result in the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree to which Acquiring Fund is a party or by
which it is bound, except as otherwise disclosed in writing to and accepted
by Target Trust;
4.2.8. Except as otherwise disclosed in writing to and accepted by
Target Trust, no litigation, administrative proceeding, or investigation of
or before any court or governmental body is presently pending or (to PACE
Trust's knowledge) threatened against PACE Trust with respect to Acquiring
Fund or any of its properties or assets that, if adversely determined,
would materially and adversely affect Acquiring Fund's financial condition
or the conduct of its business; and PACE Trust knows of no facts that might
form the basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially or adversely affects its business or its ability to consummate
the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of PACE Trust's board of trustees (together with Target Trust's board
of trustees, the "Boards"), which has made the determinations required by
Rule 17a-8(a) under the 1940 Act; and this Agreement constitutes a valid
and legally binding obligation of Acquiring
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Fund, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and laws of
general applicability relating to or affecting creditors' rights and to
general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for the
execution or performance of this Agreement by PACE Trust, except for (a)
the filing with the SEC of the Registration Statement and (b) such
consents, approvals, authorizations, and filings as have been made or
received or as may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the time
of the Meeting, and at the Effective Time, the Proxy Statement will (a)
comply in all material respects with the applicable provisions of the 1933
Act, the 1934 Act, and the 1940 Act and the rules and regulations
thereunder and (b) not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which such
statements were made, not misleading; provided that the foregoing shall not
apply to statements in or omissions from the Proxy Statement made in
reliance on and in conformity with information furnished by Target Trust
for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(g)(2) of
the Code; it qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; Acquiring
Fund intends to continue to meet all such requirements for the next taxable
year; and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund or any person "related" (within
the meaning of section 1.368-1(e)(3) of the Regulations) thereto have any
plan or intention to redeem or otherwise reacquire any Acquiring Fund
Shares issued to the Shareholders pursuant to the Reorganization, except to
the extent it is required by the 1940 Act to redeem any of its shares
presented for redemption at NAV in the ordinary course of that business;
4.2.14. Following the Reorganization, Acquiring Fund (a) will continue
Target's "historic business" (within the meaning of section 1.368-1(d)(2)
of the Regulations) and (b) will use a significant portion of Target's
"historic business assets" (within the meaning of section 1.368-1(d)(3) of
the Regulations) in a business; in addition, Acquiring Fund (c) has no plan
or intention to sell or otherwise dispose of any of the Assets, except for
dispositions made in the ordinary course of that business and dispositions
necessary to maintain its status as a RIC and (d) expects to retain
substantially all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be dissolved
or merged into another business trust or a corporation or any "fund"
thereof (within the meaning of section 851(g)(2) of the Code) following the
Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock and securities of five or fewer issuers;
4.2.17. Acquiring Fund does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it directly or
indirectly owned at any time during the past five years, any shares of
Target;
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4.2.18. Acquiring Fund's federal income tax returns, and all applicable
state and local tax returns, for all taxable years through and including
the taxable year ended July 31, 1999, have been timely filed and all taxes
payable pursuant to such returns have been timely paid; and
4.2.19. PACE Trust's audited financial statements for the year ended
July 31, 2000, to be delivered to Target Trust, fairly represent Acquiring
Fund's financial position as of that date and the results of its operations
and changes in its net assets for the year then ended.
4.3. Each Fund represents and warrants to the Trust of which the other Fund
is a series, on behalf of such other Fund, as follows:
4.3.1. The fair market value of the Acquiring Fund Shares received by
each Shareholder will be approximately equal to the fair market value of
its Target Shares constructively surrendered in exchange therefor;
4.3.2. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
4.3.3. The fair market value of the Assets on a going concern basis will
equal or exceed the Liabilities to be assumed by Acquiring Fund and those
to which the Assets are subject;
4.3.4. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;
4.3.5. Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market
value of the net assets, and at least 70% of the fair market value of the
gross assets, held by Target immediately before the Reorganization. For the
purposes of this representation, any amounts used by Target to pay its
Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions in the
ordinary course of its business required by section 22(e) of the 1940 Act
and (b) regular, normal dividend distributions made to conform to its
policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code) after the date of this Agreement will be included
as assets held thereby immediately before the Reorganization;
4.3.6. None of the compensation received by any Shareholder who is an
employee of or service provider to Target will be separate consideration
for, or allocable to, any of the Target Shares held by such Shareholder;
none of the Acquiring Fund Shares received by any such Shareholder will be
separate consideration for, or allocable to, any employment agreement,
investment advisory agreement, or other service agreement; and the
consideration paid to any such Shareholder will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services;
4.3.7. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" (within the meaning of section 304(c) of
the Code) of Acquiring Fund; and
4.3.8. Neither Fund will be reimbursed for any expenses incurred by it
or on its behalf in connection with the Reorganization unless those
expenses are solely and directly related to the Reorganization (determined
in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B.
187).
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that--
(a) such ordinary course will include declaring and paying customary
dividends and other distributions and changes in operations contemplated by
each Fund's normal business activities, and
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(b) each Fund will retain exclusive control of the composition of its
portfolio until the Closing; provided that if Target's shareholders approve
this Agreement (and the transactions contemplated hereby), then between the
date of such approval and the Closing, the Funds shall coordinate their
respective portfolios so that the transfer of the Assets to Acquiring Fund
will not cause it to fail to be in compliance with any of its investment
policies and restrictions immediately after the Closing.
5.2. Target covenants to call a shareholders' meeting to consider and act
on this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby ("Meeting").
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist PACE Trust in obtaining
information PACE Trust reasonably requests concerning the beneficial ownership
of Target Shares.
5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to PACE Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal and state securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all assignments and other instruments, and will take or cause to be
taken further action, the other Fund may deem necessary or desirable in order
to vest in, and confirm to, (a) Acquiring Fund, title to and possession of all
the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and state
securities laws it deems appropriate to continue its operations after the
Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all its obligations to be performed hereunder at or before
the Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated hereby, as of the Effective Time, with the same force and effect
as if made at and as of the Effective Time, and (c) the following further
conditions that, at or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by each Board and shall have been approved by
Target's shareholders in accordance with the Declaration of Trust and Target
Trust's By-Laws and applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received
that any other or further action is required to permit the parties to carry
out the transactions contemplated hereby. The Registration Statement shall
have become effective under the 1933 Act, no stop orders suspending the
effectiveness thereof shall have been issued, and the SEC shall not have
issued
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an unfavorable report with respect to the Reorganization under section 25(b)
of the 1940 Act nor instituted any proceedings seeking to enjoin consummation
of the transactions contemplated hereby under section 25(c) of the 1940 Act.
All consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Investment Company to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on either Fund's assets or properties, provided that either
Investment Company may for itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Target Trust shall have received an opinion of Willkie Farr &
Gallagher ("Willkie Farr") substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of PACE Trust, a
business trust duly organized, validly existing, and in good standing under
the laws of the State of Delaware, with power under its Certificate of
Trust and Trust Instrument to own all its properties and assets and, to the
knowledge of Willkie Farr, to carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by PACE Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Target Trust on
behalf of Target, is a valid and legally binding obligation of PACE Trust
with respect to Acquiring Fund, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and laws of general applicability relating to or affecting
creditors' rights and to general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement and the receipt of consideration in exchange
therefor in excess of the par value thereof, will be duly authorized,
validly issued and outstanding, and fully paid and non-assessable;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate PACE Trust's Certificate of Trust, Trust Instrument, or By-Laws or
any provision of any agreement (known to Willkie Farr, without any
independent inquiry or investigation) to which PACE Trust (with respect to
Acquiring Fund) is a party or by which it is bound or (to the knowledge of
Willkie Farr, without any independent inquiry or investigation) result in
the acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree to which PACE Trust (with respect to
Acquiring Fund) is a party or by which it is bound, except as set forth in
such opinion or as otherwise disclosed in writing to and accepted by Target
Trust;
6.4.5. To the knowledge of Willkie Farr (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by PACE
Trust on behalf of Acquiring Fund of the transactions contemplated herein,
except those obtained under the 1933 Act, the 1934 Act, and the 1940 Act
and those that may be required under state securities laws;
6.4.6. PACE Trust is registered with the SEC as an investment company,
and to the knowledge of Willkie Farr no order has been issued or proceeding
instituted to suspend such registration; and
6.4.7. To the knowledge of Willkie Farr (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to PACE Trust (with respect to Acquiring Fund) or any of its
properties or assets
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attributable or allocable to Acquiring Fund and (b) PACE Trust (with
respect to Acquiring Fund) is not a party to or subject to the provisions
of any order, decree, or judgment of any court or governmental body that
materially and adversely affects Acquiring Fund's business, except as set
forth in such opinion or as otherwise disclosed in writing to and accepted
by Target Trust.
In rendering such opinion, Willkie Farr may (1) rely (i) as to matters
governed by the laws of the State of Delaware, on an opinion of competent
Delaware counsel, and (ii) as to certain factual matters, on a certificate of
PACE Trust, (2) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof, (3) limit such opinion to applicable federal and state
law, and (4) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with Willkie Farr who have devoted substantive
attention to matters directly related to this Agreement and the
Reorganization.
6.5. PACE Trust shall have received an opinion of Kirkpatrick & Lockhart
LLP ("K&L") substantially to the effect that:
6.5.1. Target is a duly established series of Target Trust, a Business
Trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts with power under the Declaration of Trust to
own all its properties and assets and, to the knowledge of K&L, to carry on
its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Target Trust on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by PACE Trust on
behalf of Acquiring Fund, is a valid and legally binding obligation of
Target Trust with respect to Target, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and laws of general applicability relating to
or affecting creditors' rights and to general principles of equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate the Declaration of Trust or Target Trust's By-Laws or any provision
of any agreement (known to K&L, without any independent inquiry or
investigation) to which Target Trust (with respect to Target) is a party or
by which it is bound or (to the knowledge of K&L, without any independent
inquiry or investigation) result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, judgment, or decree to
which Target Trust (with respect to Target) is a party or by which it is
bound, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by PACE Trust;
6.5.4. To the knowledge of K&L (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Target Trust
on behalf of Target of the transactions contemplated herein, except those
obtained under the 1933 Act, the 1934 Act, and the 1940 Act and those that
may be required under state securities laws;
6.5.5. Target Trust is registered with the SEC as an investment company,
and to the knowledge of K&L no order has been issued or proceeding
instituted to suspend such registration; and
6.5.6. To the knowledge of K&L (without any independent inquiry or
investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Target Trust (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b) Target
Trust (with respect to Target) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects Target's business, except as set
forth in such opinion or as otherwise disclosed in writing to and accepted
by PACE Trust.
In rendering such opinion, K&L may (1) make assumptions regarding the
authenticity, genuineness, and/or conformity of documents and copies thereof
without independent verification thereof, (2) limit such opinion to
A-11
<PAGE>
applicable federal and state law, and (3) define the word "knowledge" and
related terms to mean the knowledge of attorneys then with K&L who have
devoted substantive attention to matters directly related to this Agreement
and the Reorganization.
6.6. Each Investment Company shall have received an opinion of K&L,
addressed to and in form and substance reasonably satisfactory to it, as to
the federal income tax consequences mentioned below ("Tax Opinion"). In
rendering the Tax Opinion, K&L may rely as to factual matters, exclusively and
without independent verification, on the representations made in this
Agreement, which K&L may treat as representations made to it, or in separate
letters addressed to K&L and the certificates delivered pursuant to paragraph
3.4. The Tax Opinion shall be substantially to the effect that, based on the
facts and assumptions stated therein and conditioned on consummation of the
Reorganization in accordance with this Agreement, for federal income tax
purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities,
followed by Target's distribution of those shares pro rata to the
Shareholders constructively in exchange for their Target Shares, will
qualify as a reorganization within the meaning of section 368(a)(1) of the
Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
6.6.2. Target will recognize no gain or loss on the transfer of the
Assets to Acquiring Fund in exchange solely for Acquiring Fund Shares and
Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. Acquiring Fund will recognize no gain or loss on its receipt of
the Assets in exchange solely for Acquiring Fund Shares and its assumption
of the Liabilities;
6.6.4. Acquiring Fund's basis in the Assets will be the same as Target's
basis therein immediately before the Reorganization, and Acquiring Fund's
holding period for the Assets will include Target's holding period
therefor;
6.6.5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares pursuant
to the Reorganization; and
6.6.6. A Shareholder's aggregate basis in the Acquiring Fund Shares to
be received by it in the Reorganization will be the same as the aggregate
basis in its Target Shares to be constructively surrendered in exchange for
those Acquiring Fund Shares, and its holding period for those Acquiring
Fund Shares will include its holding period for those Target Shares,
provided the Shareholder held them as capital assets at the Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that
no opinion is expressed as to the effect of the Reorganization on the Funds or
any Shareholder with respect to any Asset as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes at the end
of a taxable year (or on the termination or transfer thereof) under a mark-to-
market system of accounting.
At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, such waiver will not have a material adverse effect on
its Fund's shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
A-12
<PAGE>
7.2. Expenses of the Reorganization that relate to the Acquiring Fund and
Target will be borne by Mitchell Hutchins. Any such expenses which are so
borne by Mitchell Hutchins will be solely and directly related to the
Reorganization.
8. ENTIRE AGREEMENT; NO SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or before the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at
or before the Effective Time, (b) if a condition to its obligations has not
been met and it reasonably appears that such condition will not or cannot be
met, or (c) if the Closing has not occurred on or before , 2001; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the trustees or officers
of either Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in any manner
mutually agreed on in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies
under or by reason of this Agreement.
11.3. PACE Trust acknowledges that Target Trust is a Business Trust. This
Agreement is executed by Target Trust on behalf of Target and by its trustees
and/or officers in their capacities as such, and not individually. Target
Trust's obligations under this Agreement are not binding on or enforceable
against any of its trustees, officers, or shareholders but are only binding on
and enforceable against Target's assets and property; and a trustee of Target
Trust shall not be personally liable hereunder to PACE Trust or its trustees
or shareholders for any act, omission, or obligation of Target Trust or any
other trustee thereof. PACE Trust agrees that, in asserting any rights or
claims under this Agreement on behalf of Acquiring Fund, it shall look only to
Target's assets and property in settlement of such rights or claims and not to
such trustees, officers, or shareholders.
11.4. A trustee of PACE Trust shall not be personally liable hereunder to
Target Trust or its trustees or shareholders for any act, omission, or
obligation of PACE Trust or any other trustee thereof. Target Trust agrees
A-13
<PAGE>
that, in asserting any claim against PACE Trust or its trustees, it shall look
only to Acquiring Fund's assets for payment under such claim; and neither the
shareholders nor the trustees of PACE Trust, nor any of their agents, whether
past, present, or future, shall be personally liable therefor.
11.5. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been executed by each Investment
Company and delivered to the other party hereto. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
PaineWebber Managed Investments
Trust, acting on behalf of its
series, PaineWebber Asia Pacific
Growth Fund
By: _________________________________
PaineWebber PACE Select Advisors
Trust, acting on behalf of its
series, PACE International Emerging
Markets Equity Investments
By: _________________________________
Solely with respect to paragraph 7.2
hereof:
Mitchell Hutchins Asset Management
Inc.
By: _________________________________
A-14
<PAGE>
APPENDIX B
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, the following entities owned beneficially or of
record 5% or more of the Class [ ] shares of Asia Pacific Growth Fund or PACE
International Emerging Markets Equity Fund. Mitchell Hutchins did not know of
any other person who owned beneficially or of record 5% or more of any other
class of either Fund's outstanding equity securities as of the Record Date.
ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
PERCENT BENEFICIAL
OWNERSHIP OF
PERCENT BENEFICIAL COMBINED PACE
OWNERSHIP OF ASIA INTERNATIONAL
PACIFIC GROWTH EMERGING MARKETS
SHAREHOLDER'S NAME/ADDRESS FUND EQUITY FUND
-------------------------- ------------------ ------------------
<S> <C> <C>
[ ] % %
c/o Mitchell Hutchins Asset Management
Inc.
51 West 52nd Street
New York, New York 10019-6114
</TABLE>
PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
PERCENT BENEFICIAL
PERCENT BENEFICIAL OWNERSHIP OF COMBINED
OWNERSHIP OF PACE PACE
ASIA PACIFIC INTERNATIONAL EMERGING
SHAREHOLDER'S NAME/ADDRESS GROWTH FUND MARKETS EQUITY FUND
-------------------------- ------------------ ----------------------
<S> <C> <C>
[ ] % %
c/o Mitchell Hutchins Asset
Management Inc.
51 West 52nd Street
New York, New York 10019-6114
</TABLE>
B-1
<PAGE>
APPENDIX C
MANAGEMENT'S DISCUSSION OF PACE INTERNATIONAL EMERGING MARKETS EQUITY FUND'S
PERFORMANCE
THE DISCUSSION BELOW WAS TAKEN FROM PACE INTERNATIONAL EMERGING MARKETS
EQUITY FUND'S ANNUAL REPORT FOR ITS FISCAL YEAR ENDED JULY 31, 2000. THIS
DISCUSSION HAS NOT BEEN REVISED TO REFLECT SUBSEQUENT CHANGES, WHICH ARE
DISCUSSED ABOVE IN THE PROXY STATEMENT/PROSPECTUS.
Advisers: Schroder Investment Management North America Inc.
Portfolio Managers: John Troiano, Heather Crighton and Mark Bridgeman
Objective: Capital appreciation
Investment Process: The Portfolio invests primarily in stocks of companies
domiciled in emerging market countries. The adviser's network of regional
specialists and analysts in 24 countries supports an intensive program of
proprietary emerging markets research. Schroder uses its proprietary research
network to identify attractively valued companies in emerging markets that it
believes can leverage off the growth opportunities in these faster growing
economies.
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 7/31/00
<TABLE>
<CAPTION>
SINCE
INCEPTION
6 MONTHS 1 YEAR 3 YEARS 8/24/95
-------- ------ ------- ---------
<S> <C> <C> <C> <C>
With PACE program fee*...................... -16.99% -1.51% -9.26% -1.08%
Without PACE program fee.................... -16.36% -0.02% -7.89% 0.42%
MSCI EMF Ex-Malaysia Index.................. -13.24% 6.74% -7.08% -0.04%
Lipper Emerging Markets Funds Median........ -12.30% 10.93% -7.07% 0.82%
</TABLE>
----------------
* The maximum annual PACE program fee is 1.5% of the value of PACE assets.
Past performance does not predict future performance. The return and
principal value of an investment will fluctuate, so that an investor's shares,
when redeemed, may be worth more or less than their original cost. Performance
results assume reinvestment of all dividends and capital gains. Total returns
for periods of one year or less are cumulative.
C-1
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PORTFOLIO AND THE
MSCI EMF EX-MALAYSIA INDEX
PORTFOLIO PORTFOLIO MSCI EMF
WITHOUT FEE WITH FEE* EX-MALAYSIA INDEX
Aug-95 $10,017 $10,013 $10,000
Sep-95 $9,900 $9,884 $9,981
Oct-95 $9,517 $9,490 $9,633
Nov-95 $9,475 $9,436 $9,424
Dec-95 $9,814 $9,761 $9,816
Jan-96 $10,765 $10,694 $10,581
Feb-96 $10,481 $10,399 $10,304
Mar-96 $10,623 $10,527 $10,265
Apr-96 $10,965 $10,853 $10,648
May-96 $11,057 $10,930 $10,681
Jun-96 $11,074 $10,933 $10,752
Jul-96 $10,423 $10,277 $10,001
Aug-96 $10,581 $10,420 $10,195
Sep-96 $10,581 $10,407 $10,267
Oct-96 $10,106 $9,927 $9,904
Nov-96 $10,348 $10,152 $10,024
Dec-96 $10,649 $10,435 $10,059
Jan-97 $11,202 $10,963 $10,849
Feb-97 $11,629 $11,366 $11,311
Mar-97 $11,478 $11,205 $11,077
Apr-97 $11,629 $11,338 $11,326
May-97 $12,190 $11,870 $11,665
Jun-97 $12,826 $12,474 $12,439
Jul-97 $13,061 $12,686 $12,827
Aug-97 $11,654 $11,306 $11,480
Sep-97 $12,190 $11,811 $11,916
Oct-97 $10,206 $9,876 $10,009
Nov-97 $10,005 $9,669 $9,789
Dec-97 $10,147 $9,795 $10,044
Jan-98 $9,609 $9,264 $9,280
Feb-98 $10,231 $9,851 $10,023
Mar-98 $10,601 $10,195 $10,514
Apr-98 $10,660 $10,238 $10,525
May-98 $9,248 $8,871 $9,104
Jun-98 $8,399 $8,046 $8,221
Jul-98 $8,752 $8,374 $8,541
Aug-98 $6,280 $6,002 $6,067
Sep-98 $6,591 $6,291 $6,485
Oct-98 $7,289 $6,948 $7,166
Nov-98 $7,625 $7,260 $7,718
Dec-98 $7,668 $7,291 $7,606
Jan-99 $7,693 $7,306 $7,484
Feb-99 $7,643 $7,249 $7,556
Mar-99 $8,524 $8,075 $8,552
Apr-99 $9,498 $8,987 $9,610
May-99 $9,363 $8,847 $9,555
Jun-99 $10,523 $9,932 $10,639
Jul-99 $10,210 $9,624 $10,350
Aug-99 $10,235 $9,636 $10,444
Sep-99 $9,761 $9,178 $10,091
Oct-99 $9,939 $9,333 $10,306
Nov-99 $10,803 $10,132 $11,230
Dec-99 $12,410 $11,625 $12,659
Jan-00 $12,205 $11,419 $12,735
Feb-00 $12,146 $11,349 $12,903
Mar-00 $12,316 $11,494 $12,966
Apr-00 $10,917 $10,175 $11,737
May-00 $10,430 $9,709 $11,252
Jun-00 $10,831 $10,070 $11,648
Jul-00 $10,208 $9,479 $11,049
The graph depicts the performance of PACE International Emerging Markets
Equity Investments versus the MSCI EMF ex-Malaysia Index. It is important to
note that PACE International Emerging Markets Equity Investments is a
professionally managed portfolio while the Index is not available for
investment and is unmanaged. The comparison is shown for illustrative purposes
only.
ADVISER'S COMMENTS
Over the fiscal year ended July 31, 2000, the Portfolio underperformed the
MSCI EMF Index. This underperformance can be attributed primarily to stock
selection in Asia, particularly in Korean and Taiwanese technology stocks.
Stock selection in Latin America (Argentina) and Europe, Middle East and
Africa (EMEA) (Turkey) also detracted from performance. The Portfolio's
underperformance was offset slightly by overweighted positions in Mexico and
Brazil along with an overweighted position in Malaysia prior to that country's
reinstatement in the MSCI EMF Index.
Recent performance of emerging markets has been driven by perceptions about
the direction of the U.S. economy and U.S. interest rates. Market volatility
in the developed markets--notably in the U.S. NASDAQ Composite Index--also
affected the emerging markets, not because of the high proportion of
technology stocks in emerging markets, but because in times of uncertainty
higher risk assets tend to suffer. As a result, emerging markets
underperformed developed markets during the second quarter of 2000, even
though economic and earnings data continued to improve. Recent emerging market
performance has improved, as U.S. economic data have suggested that the U.S.
economy is slowing and may achieve a soft landing. Falling interest rates and
compelling valuations make Brazil our favorite Latin American market. We have
increased the Portfolio's exposure to Asia through purchases of hardware
stocks in Taiwan and Korea. Within EMEA, the Portfolio is underweighted in
Greece and South Africa.
The short-term direction of the emerging markets will continue to depend on
perceptions about the global economy and investor attitudes toward risk. It is
hard to envision significant outperformance in emerging markets while there
are doubts as to whether or not the U.S. economy will suffer a hard landing.
However, we believe that ongoing structural improvements within emerging
markets will limit any underperformance and provide a platform for renewed
strength once the outlook for the U.S. becomes clearer. Although recent data
have dampened fears of a hard landing for the U.S. economy, sentiment toward
Latin America remains fragile due to the belief that it would be the hardest
hit region in the event of a U.S. economic downturn. The impact of a U.S. hard
landing would affect both direct trades links (mainly impacting Mexico) and
the availability of capital via interest rates (more significant for Brazil).
Given our core scenario for a soft landing, we believe that the capital flows
issue has been exaggerated.
C-2
<PAGE>
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS -- PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 7/31/00
---------------- -------
<S> <C>
Net Assets ($MM)........................................................ $82.2
Number of Securities.................................................... 181
Equities (common and preferred stocks, warrants and rights)............. 96.7%
Cash & Equivalents...................................................... 3.3%
<CAPTION>
REGIONAL ALLOCATION* 7/31/00
-------------------- -------
<S> <C>
Asia.................................................................... 48.2%
Latin America........................................................... 25.2
Europe/Mid East/Africa.................................................. 23.3
Cash & Equivalents...................................................... 3.3
-----
Total................................................................... 100.0%
<CAPTION>
TOP FIVE COUNTRIES* 7/31/00
------------------- -------
<S> <C>
Taiwan.................................................................. 13.0%
Korea................................................................... 11.7
Brazil.................................................................. 11.0
Mexico.................................................................. 10.6
Hong Kong/China......................................................... 7.4
-----
Total................................................................... 53.7%
<CAPTION>
TOP TEN STOCKS* 7/31/00
--------------- -------
<S> <C>
Telefonos de Mexico..................................................... 4.1%
Samsung Electronics..................................................... 3.7
China Telecom Hong Kong................................................. 2.6
Infosys Technologies.................................................... 2.5
China Unicom............................................................ 2.4
Korea Telecom........................................................... 2.3
Taiwan Semiconductor.................................................... 2.2
United Microelectronics................................................. 2.1
Korea Electric Power.................................................... 2.0
Compeq Manufacturing.................................................... 1.8
-----
Total................................................................... 25.7%
</TABLE>
----------------
* Weightings represent percentages of net asset as of July 31, 2000. The
Portfolio is actively managed and all holdings are subject to change.
C-3
<PAGE>
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
PROXY PAINEWEBBER ASIA PACIFIC GROWTH FUND PROXY
(a series of PaineWebber Managed Investments Trust)
Special Meeting of Shareholders - January 25, 2001
This proxy is being solicited for the Board of Trustees of PaineWebber Managed
Investments Trust ("Trust") on behalf of PaineWebber Asia Pacific Growth Fund, a
series of the Trust. The undersigned hereby appoints as proxies [________] and
[________], and each of them (with the power of substitution) to vote for the
undersigned all shares of beneficial interest of the undersigned in PaineWebber
Asia Pacific Growth Fund, a series of the Trust, at the above referenced meeting
and any adjournment thereof, with all the power the undersigned would have if
personally present. The shares represented by this proxy will be voted as
instructed on the reverse side of this proxy card. Unless indicated to the
contrary, this proxy shall be deemed to grant authority to vote "FOR" the
proposal relating to PaineWebber Asia Pacific Growth Fund.
VOTE VIA THE INTERNET: http://
VOTE VIA TELEPHONE:
CONTROL NUMBER: [999 9999 9999 999]
If shares are held by an individual, sign your
name exactly as it appears on this card. If shares
are held jointly, either party may sign, but the
name of the party signing should conform exactly
to the name shown on this proxy card. If shares
are held by a corporation, partnership or similar
account, the name and the capacity of the
individual signing the proxy card should be
indicated -for example: "ABC Corp., John Doe,
Treasurer."
__________________________________________________
Signature
__________________________________________________
Signature (if held jointly)
__________________________________________, 200___
Date
Please mark your vote on the reverse side of this card.
<PAGE>
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
The Board of Trustees recommends a vote "FOR" the Proposal. Please indicate your
vote by filling in the box completely. EXAMPLE:
FOR AGAINST ABSTAIN
1. Approval of the Agreement and Plan of [_] [_] [_]
Reorganization and Termination that
provides for the reorganization of PaineWebber
Asia Pacific Growth Fund, a series of PaineWebber
Managed Investments Trust, into PACE
International Emerging Markets Equity
Investments, a series of PaineWebber PACE
Select Advisors Trust.
Please date and sign the reverse side of this card.
<PAGE>
--------------------------------------------------------------------------------
Your Proxy Vote is Important!
---------
[GRAPHIC]
And now you can Vote your Proxy on the PHONE or on the INTERNET.
It saves Money! Telephone and Internet voting saves postage costs.
Savings which can help minimize fund expenses.
It saves Time! Telephone and Internet voting is instantaneous- 24 hours a day.
It's Easy! Just follow these simple steps:
1. Read you proxy statement and have it at hand.
2. Call toll-free 1-800-597-7836 for automated Instructions, or go to website:
https://vote.proxy-direct.com
3. Enter your 14 digit Control Number from your Proxy Card.
4. Follow the recorded or on-screen directions.
5. Do not mail your Proxy Card when you vote by phone or internet.
---
6. If you have any questions regarding the meeting agenda or the execution of
your proxy, please call Toll Free 1-877-388-2844.
--------------------------------------------------------------------------------
<PAGE>
PAINEWEBBER PACE SELECT ADVISORS TRUST
(on behalf of PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS)
PAINEWEBBER MANAGED INVESTMENTS TRUST
(on behalf of PAINEWEBBER ASIA PACIFIC GROWTH FUND)
51 West 52/nd/ Street
New York, New York 10019-6114
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates specifically to the
proposed Reorganization whereby PACE International Emerging Markets Equity
Investments ("PACE International Emerging Markets Equity Fund"), a series of
PaineWebber PACE Select Advisors Trust ("PACE Trust"), would acquire all of the
assets of PaineWebber Asia Pacific Growth Fund ("Asia Pacific Growth Fund"), a
series of PaineWebber Managed Investments Trust, in exchange solely for shares
of PACE International Emerging Markets Equity Fund and the assumption by PACE
International Emerging Markets Equity Fund of all of Asia Pacific Growth Fund's
stated liabilities. This Statement of Additional Information consists of this
cover page, the pro forma financial statements of PACE International Emerging
Markets Equity Fund (giving effect to the Reorganization) for the year ended
July 31, 2000, and the following described documents, each of which is
incorporated by reference herein and accompanies this Statement of Additional
Information:
(1) The combined Statement of Additional Information of PACE Trust, which
includes information relating to PACE International Emerging Markets Equity
Fund, dated November __, 2000 (Incorporated by reference from N-1A, SEC File
Numbers 033-87254 and 811-08764, filed November 9, 2000, accession number
0000912057-00-048241);
(2) The combined Annual Report to Shareholders of PACE Trust, which
includes information relating to PACE International Emerging Markets Equity Fund
for the fiscal year ended July 31, 2000 (Incorporated by reference from N-30D,
SEC File Number 811-08764, filed October 6, 2000, accession number
0000912057-00-043979);
(3) The Semi-Annual Report to Shareholders of Asia Pacific Growth Fund,
dated April 30, 2000 (Incorporated by reference from N-30D, SEC File Number 811-
04040, filed July 7, 2000, accession number 0000912057-00-031151);
(4) The Annual Report to Shareholders of Asia Pacific Growth Fund for the
fiscal year ended October 31, 1999 (Incorporated by reference from N-30D, SEC
File Number 811-04040 filed January 6, 2000, accession number 0000912057-00-
000341).
<PAGE>
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Prospectus/Proxy Statement dated December __,
2000 relating to the proposed Reorganization. A copy of the Prospectus/Proxy
Statement may be obtained without charge by calling toll-free 1-800-647-1568.
This Statement of Additional Information is dated December __, 2000.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The following tables set forth the unaudited pro forma condensed Statement
of Assets and Liabilities as of July 31, 2000, the unaudited pro forma condensed
Statement of Operations for the twelve month period ended July 31, 2000 and the
unaudited pro forma Portfolio of Investments as of July 31, 2000 for Asia
Pacific Growth Fund and PACE International Emerging Markets Equity Fund as
adjusted giving effect to the Reorganization.
The pro forma Portfolio of Investments contains information about the
securities holdings of the Funds as of July 31, 2000, which has, and will
continue to, change over time due to normal portfolio turnover in response to
changes in market conditions. It is not expected that PACE International
Emerging Markets Equity Fund will revise any of its policies following the
Reorganization to reflect those of Asia Pacific Growth Fund. SIMNA has reviewed
Asia Pacific Growth Fund's current portfolio and determined that Asia Pacific
Growth Fund's holdings of stocks of companies in emerging market countries
generally are compatible with PACE International Emerging Markets Equity Fund's
portfolio. However, Asia Pacific Growth Fund holds securities of companies in
developed markets within the Asia Pacific Region that are not appropriate
investments for PACE International Emerging Markets Equity Fund. In addition,
some emerging market countries (including India, Korea, Malaysia and Taiwan) do
not permit ownership of securities to be transferred from one fund to another as
part of a reorganization. If shareholders of Asia Pacific Growth Fund approve
the Reorganization, all these securities will be liquidated in an orderly manner
in connection with the Reorganization, and the proceeds of these sales
reinvested in assets that are consistent with the holdings of PACE International
Emerging Markets Equity Fund or held in temporary investments until after the
Reorganization is effected. As of November 30, 2000, Asia Pacific Growth Fund's
investments in these securities represented approximately [__]% of its total
portfolio. The relative portion of Asia Pacific Growth Fund's assets represented
by these investments may change depending on changes in market conditions.
The need for Asia Pacific Growth Fund to dispose of assets in connection
with the Reorganization may result in the Fund's selling securities at a
disadvantageous time, and could result in Asia Pacific Growth Fund's realizing
gains (or losses) that would not otherwise have been realized. [Because the Fund
[had approximately $___ million in capital loss carryforwards as of November 30,
2000] [has significant capital loss carryforwards] to offset any realized
capital gains, the liquidation of these assets is not expected to result in any
significant additional distributions to the Fund's shareholders.] It is also
expected that some of Asia Pacific Growth Fund's holdings may not remain at the
time of the Reorganization due to normal portfolio turnover.
<PAGE>
PACE International Emerging Markets Equity Investments
PaineWebber Asia Pacific Growth Fund
Proforma Statement of Assets and Liabilities
For the Year Ended July 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Pro Forma Combined
PACE International PACE International
Emerging Markets PW Asia Pacific Emerging Markets
Equity Investments Growth Fund Equity Investments
------------------- --------------- -----------------
<S> <C> <C> <C>
Assets
Investments in securities, at value (cost - $76,659,211,
$25,555,929, and $102,215,140, respectively) $ 80,002,267 $ 30,460,441 $110,462,708
Investment of cash collateral for securities loaned (cost -
$2,193,700, $0 and $2,193,700, respectively) 2,193,700 - 2,193,700
Cash (including cash denominated in foreign currencies, at value) 1,714,189 - 1,714,189
Receivable for investments sold 790,978 - 790,978
Receivable for shares of beneficial interest sold 60,258 2,671 62,929
Dividends and interest receivable 180,590 30,185 210,775
Deferred organizational expenses 1,025 49,035 50,060
Other assets 42,836 236,475 279,311
----------------- ------------- ------------
Total assets 84,985,843 30,778,807 115,764,650
----------------- ------------- ------------
Liabilities
Payable for cash collateral for securities loaned 2,193,700 - 2,193,700
Payable for investments purchased 331,662 3,042 334,704
Payable for shares of beneficial interest repurchased 34,311 50,155 84,466
Unrealized depreciation of forward foreign currency contracts - 155,009 155,009
Payable to affiliates 59,813 33,902 93,715
Accrued expenses and other liabilities 187,844 239,430 427,274
----------------- ------------- ------------
Total liabilities 2,807,330 481,538 3,288,868
----------------- ------------- ------------
Net assets
Common Stock/Beneficial interest shares of $0.001 par
value outstanding -
6,869,421, 2,919,826 and 9,402,014, respectively 79,889,855 50,381,147 130,271,002
Accumulated net investment loss (134,207) (516,991) (651,198)
Accumulated net realized losses from investment transactions (877,165) (24,234,563) (25,111,728)
Net unrealized appreciation of investments 3,300,030 4,667,676 7,967,706
----------------- ------------- ------------
Net assets applicable to shares outstanding $ 82,178,513 $ 30,297,269 $112,475,782
================= ============= ============
Class P:
Net assets $ 82,178,513 $ - $ 82,178,513
----------------- ------------- ------------
Shares outstanding 6,869,421 - 6,869,421
----------------- ------------- ------------
Net asset value and offering price per share $ 11.96 $ - $ 11.96
================= ============= ============
Class A:
Net assets $ - $ 11,417,306 $ 15,529,960
----------------- ------------- ------------
Shares outstanding - 1,083,405 1,298,204
----------------- ------------- ------------
Net asset and redemption value per share $ - $ 10.54 $ 11.96
================= ============= ============
Maximum offering price per share (net asset value plus sales charge of
4.5% of offering price) $ - $ 11.04 $ 12.52
================= ============= ============
Class B:
Net assets $ - $ 12,724,670 $ 13,517,544
----------------- ------------- ------------
Shares outstanding - 1,238,468 1,129,958
----------------- ------------- ------------
Net asset value and offering price per share $ - $ 10.27 $ 11.96
================= ============= ============
Class C:
Net assets $ - $ 5,936,554 $ 7,834,434
----------------- ------------- ------------
Shares outstanding - 577,174 654,823
----------------- ------------- ------------
Net asset value and offering price per share $ - $ 10.29 $ 11.96
================= ============= ============
Class Y:
Net assets $ - $ 218,739 $ 961,589
----------------- ------------- ------------
Shares outstanding - 20,779 80,387
----------------- ------------- ------------
Net asset value and offering price per share $ - $ 10.53 $ 11.96
================= ============= ============
</TABLE>
See accompanying notes to proforma financial statements
<PAGE>
PACE International Emerging Markets Equity Investments
PaineWebber Asia Pacific Growth Fund
Proforma Statement of Operations
For the Year Ended July 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Pro Forma Combined
PACE International PACE International
Emerging Markets PW Asia Pacific Emerging Markets
Equity Investments Growth Fund Adjustments Equity Investments
------------------ --------------- ------------ -----------------
<S> <C> <C> <C> <C>
Investment income:
Interest (net of foreign withholding taxes, if any) $ 78,638 $ 50,258 $ - $ 128,896
Dividend (net of foreign withholding taxes, if any) 1,198,182 640,793 - 1,838,975
--------------- ---------- ---------- -------------
1,276,820 691,051 - 1,967,871
--------------- ---------- ---------- -------------
Expenses:
Investment advisory and administration 991,438 472,213 (39,352) (a) 1,424,299
Shareholder distribution and servicing fees - 284,567 - 284,567
Transfer agency fees and expenses 99,510 55,925 - 155,435
Reports and notices to shareholders 26,062 35,926 (28,741) (b) 33,247
Legal and audit 60,522 50,704 (50,704) (b) 60,522
Trustees' fees 26,250 13,500 (13,500) (b) 26,250
Federal and state registration fees 21,964 67,245 (53,796) (b) 35,413
Amortization of organizational expenses 19,032 7,619 - 26,651
Custody and accounting 320,527 137,729 - 458,256
Other expenses 6,599 68,913 - 75,512
--------------- ---------- ---------- -------------
1,571,904 1,194,341 (186,093) 2,580,152
Less: Fee waivers and reimbursements from investment
adviser (222,127) (401) - (222,528)
--------------- ---------- ---------- -------------
Net expenses 1,349,777 1,193,940 (186,093) 2,357,624
--------------- ---------- ---------- -------------
Net investment income (loss) (72,957) (502,889) 186,093 (389,753)
--------------- ---------- ---------- -------------
Realized and unrealized gains from investment activitis:
Net realized gains from investment transactions: 9,755,094 3,319,503 - 13,074,597
Net change in unrealized appreciation (depreciation)
of investments (8,150,045) 4,115,219 - (4,034,826)
--------------- ---------- ---------- -------------
Net realized and unrealized gains from investment
activities 1,605,049 7,434,722 - 9,039,771
--------------- ---------- ---------- -------------
Net increase in net assets resulting from operations $ 1,532,092 $6,931,833 $ 186,093 $ 8,650,018
=============== ========== ========== =============
</TABLE>
----------
(a) Reflects decrease in fees resulting from lower fee schedule of PACE
International Emerging Markets Equity Investments.
(b) Reflects the anticipated savings of
the merger.
See accompanying notes to proforma financial statements
<PAGE>
PACE INTERNATIONAL EMERGING MARKETS EQUITY INVESTMENTS
PAINEWEBBER ASIA PACIFIC GROWTH FUND
PROFORMA PORTFOLIO OF INVESTMENTS
FOR THE YEAR ENDED JULY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA COMBINED
COMBINED PACE INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
------------- ------------------ ----------- ------------------
<S> <C> <C> <C>
COMMON STOCKS - 92.48%
ARGENTINA - 0.94%
Alcoholic Beverages - 0.15%
15,400 Quilmes Industrial Wuinsa S.A. ADR $ 165,550 $ - $ 165,550
------------ --------- ------------
Diversified Industrials - 0.18%
11,751 Perez Companc S.A. Class B 202,705 - 202,705
------------ --------- ------------
Financial Services - 0.11%
6,728 Grupo Financiero Galicia S.A. ADR Class B(1)* 119,001 - 119,001
------------ --------- ------------
Telecommunications - 0.51%
112,000 Telecom Argentina Stet-Fran Tel S.A. Class B 573,543 - 573,543
------------ --------- ------------
TOTAL ARGENTINA COMMON STOCK 1,060,799 - 1,060,799
------------ --------- ------------
AUSTRALIA - 4.88%
Banks - 0.85%
35,400 Common Wealth Bank of Australia - 569,970 569,970
27,000 National Australia Bank Ltd. - 387,240 387,240
------------ --------- ------------
- 957,210 957,210
------------ --------- ------------
Breweries, Pubs, & Restaurants - 0.28%
113,100 Foster's Brewing Group, Ltd. - 310,401 310,401
------------ --------- ------------
Computer Software - 0.29%
246,000 IBA Technologies, Ltd - 131,096 131,096
35,800 Securenet - 192,855 192,855
------------ --------- ------------
- 323,951 323,951
------------ --------- ------------
Diversified Industrials - 0.61%
64,939 Broken Hill Proprietary Co. Ltd. - 686,491 686,491
------------ --------- ------------
Electricity - 0.25%
144,600 United Energy - 279,757 279,757
------------ --------- ------------
Extractive Industries - 0.15%
45,200 Coles Myer Limited - 172,540 172,540
------------ --------- ------------
Leisure & Hotels - 0.21%
42,100 TABCORP Holdings, Ltd. - 231,671 231,671
------------ --------- ------------
Media - 0.93%
86,700 News Corp Ltd. - 1,049,619 1,049,619
------------ --------- ------------
Mining - 0.53%
11,300 Brambles Industries Ltd. - 327,931 327,931
17,700 Rio Tinto Ltd. - 264,951 264,951
------------ --------- ------------
- 592,882 592,882
------------ --------- ------------
Oil Exploration & Production - 0.15%
23,700 Woodside Petroleum Ltd. - 173,937 173,937
------------ --------- ------------
Pharmaceuticals - 0.24%
13,500 CSL Ltd. - 265,876 265,876
------------ --------- ------------
Real Estate - 0.39%
36,500 Lend Lease Corp. Ltd. - 440,189 440,189
------------ --------- ------------
TOTAL AUSTRALIA COMMON STOCKS - 5,484,524 5,484,524
------------ --------- ------------
BERMUDA - 0.29%
Real Estate - 0.29%
170,000 Esprit Holdings - 156,955 156,955
101,000 Hong Kong Land Holdings Ltd. - 171,700 171,700
------------ --------- ------------
- 328,655 328,655
------------ --------- ------------
TOTAL BERMUDA COMMON STOCK - 328,655 328,655
------------ --------- ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
COMBINED PACE INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
------------- ------------------ ----------- ------------------
<S> <C> <C> <C>
Brazil - 3.09%
Basic Materials - 0.24%
12,700 Aracruz Celulose S.A. ADR 273,844 - 273,844
------------------ ----------- ----------
Food Stores - 0.44%
15,800 Companhia Brasileira de Destribucion 498,687 - 498,687
------------------ ----------- ----------
Oil & Gas - 0.19%
18,300 Ultrapar Participacoes S.A. 215,025 - 215,025
------------------ ----------- ----------
Telecommunications - 2.22%
5,000 Brasil Telecom Participacoes S.A. ADR 360,000 - 360,000
43,700 Embratel Participacoes S.A. ADR 939,550 - 939,550
43,555 Tele Norte Leste Participacoes 1,042,598 - 1,042,598
5,000 Telecomunicacoes Brasileiras S.A. (Telebras), ADR* - - -
4,000 Telesp Celular Participacoes S.A. ADR 150,750 - 150,750
------------------ ----------- ----------
2,492,898 - 2,492,898
------------------ ----------- ----------
TOTAL BRAZIL COMMON STOCK 3,480,454 - 3,480,454
------------------ ----------- ----------
Chile - 1.48%
Banks - 0.26%
16,700 Banco Santiago 287,031 - 287,031
------------------ ----------- ----------
Breweries, Pubs & Restaurants - 0.33%
17,000 Compania Cervecerias Unidas S.A. ADS(1) 374,000 - 374,000
------------------ ----------- ----------
Electricity - 0.35%
11,218 Enersis S.A. ADR 218,050 - 218,050
13,100 Gener S.A. ADR 173,575 - 173,575
------------------ ----------- ----------
391,625 - 391,625
------------------ ----------- ----------
Diversified Industries - 0.05%
6,100 Quinenco S.A. ADR 51,469 - 51,469
------------------ ----------- ----------
Retailers, Food - 0.18%
12,200 Distribucion y Servicio D&S ADS 202,825 - 202,825
------------------ ----------- ----------
Telecommunications - 0.32%
23,850 Compania de Telecomunicaciones de Chile S.A. ADR 357,750 - 357,750
------------------ ----------- ----------
TOTAL CHILE COMMON STOCK 1,664,700 - 1,664,700
------------------ ----------- ----------
China - 0.61%
Transportation - 0.23%
1,336,000 China East Airline - 256,976 256,976
------------------ ----------- ----------
Electricity & Gas - 0.38%
3,000 Huaneng Power Intl, Inc. ADR 49,875 - 49,875
116,000 Huaneng Power Intl, Inc. Class H 47,971 - 47,971
1,468,000 PetroChina Co., Ltd Class H* 335,074 - 335,074
------------------ ----------- ----------
432,920 - 432,920
------------------ ----------- ----------
TOTAL CHINA COMMON STOCK 432,920 256,976 689,896
------------------ ----------- ----------
Czech Republic - 0.36%
Banks - 0.00%
1 Komercni Banka A.S.* 8 - 8
------------------ ----------- ----------
Utilities - 0.36%
64,000 Cez* 191,070 - 191,070
12,100 SPT Telecom A.S. (Reg) S* 218,931 - 218,931
------------------ ----------- ----------
410,001 - 410,001
------------------ ----------- ----------
TOTAL CZECH REPUBLIC COMMON STOCK 410,009 - 410,009
------------------ ----------- ----------
Egypt - 0.29%
Telecommunications - 0.29%
6,700 Mobinil* 192,877 - 192,877
16,900 Orascom Telecommunication S.A.E. GDR* 131,820 - 131,820
------------------ ----------- ----------
324,697 - 324,697
------------------ ----------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PACE PRO FORMA COMBINED
COMBINED INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
----------------- ------------------ ----------- ------------------
<S> <C> <C> <C>
TOTAL EGYPT COMMON STOCK 324,697 - 324,697
------------------ ----------- ----------
Greece - 1.45%
Banks - 0.56%
10,066 Alpha Credit Bank 376,155 - 376,155
6,373 National Bank of Greece 250,409 - 250,409
------------------ ----------- ----------
626,564 - 626,564
------------------ ----------- ----------
Telecommunications - 0.89%
37,180 Hellenic Telecom Organization 835,666 - 835,666
8,260 Stet Hellas Telecommunications(1)* 167,265 - 167,265
------------------ ----------- ----------
1,002,931 - 1,002,931
------------------ ----------- ----------
TOTAL GREECE COMMON STOCK 1,629,495 - 1,629,495
------------------ ----------- ----------
Hong Kong - 11.95%
Banks - 1.04%
122,000 Bank of East Asia - 276,121 276,121
78,500 Dao Heng Bank Group - 358,355 358,355
40,800 HSBC Holdings PLC - 538,880 538,880
------------------ ----------- ----------
- 1,173,356 1,173,356
------------------ ----------- ----------
Commerce/Industrial - 0.07%
15,000 Citic Pacific Ltd. 80,017 - 80,017
------------------ ----------- ----------
Communications - 5.10%
377,000 China Telecom Hong Kong Ltd.* 2,138,644 858,638 2,997,282
1,051,000 China Unicom Ltd.* 2,006,738 425,882 2,432,620
246,000 Global Technology Holdings - 310,717 310,717
------------------ ----------- ----------
4,145,382 1,595,237 5,740,619
------------------ ----------- ----------
Computer Software - 0.11%
158,000 Computer + Technology - 126,629 126,629
------------------ ----------- ----------
Electrical Appliances - 0.96%
701,000 Founder Holdings* 350,572 - 350,572
479,000 Legend Holdings 540,521 - 540,521
53,000 ASM Pacific Technology - 190,295 190,295
------------------ ----------- ----------
891,093 190,295 1,081,388
------------------ ----------- ----------
Financial Services - 0.11%
12,000 Hang Seng Bank Ltd. 124,256 - 124,256
------------------ ----------- ----------
Real Estate - 3.86%
76,000 Cheung Kong Holdings Ltd. 164,713 729,445 894,158
150,000 China Resources Enterprise Ltd. 216,391 - 216,391
239,000 China Resources Development Enterprises Ltd. - 344,782 344,782
116,800 Hutchison Whampoa Ltd. - 1,625,051 1,625,051
97,000 Sun Hung Kai Properties Ltd. - 761,855 761,855
232,000 Wharf Ltd. - 493,845 493,845
------------------ ----------- ----------
381,104 3,954,978 4,336,082
------------------ ----------- ----------
Retail Trade - 0.11%
140,000 Cosco Pacific Limited - 124,769 124,769
------------------ ----------- ----------
Services - 0.23%
48,000 Television Broadcasting Ltd. - 259,746 259,746
------------------ ----------- ----------
Transportation - 0.31%
167,000 Cathay Pacific Air - 349,059 349,059
------------------ ----------- ----------
Wholesale - 0.04%
9,000 Li & Fung Ltd. - 44,778 44,778
------------------ ----------- ----------
TOTAL HONG KONG COMMON STOCK 5,621,852 7,818,847 13,440,699
------------------ ----------- ----------
Hungary - 1.06%
Banks - 0.28%
6,084 OTP Bank GDS 313,326 - 313,326
------------------ ----------- ----------
Chemicals - 0.06%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PACE PRO FORMA COMBINED
COMBINED INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
----------------- ------------------ ----------- ------------------
<S> <C> <C>
2,180 BorsodChem Rt. GDR 69,433 - 69,433
------------------ ----------- ----------
Oil - 0.14%
12,200 Magyar Olaj-Es Gazipare Reszvnytaras Ag. Series "A" 162,260 - 162,260
------------------ ----------- ----------
Telecommunications - 0.57%
19,410 Matav RT ADS Series "B" (1) 644,169 - 644,169
------------------ ----------- ----------
TOTAL HUNGARY COMMON STOCK 1,189,188 - 1,189,188
------------------ ----------- ----------
India - 6.39%
Banks - 0.22%
47,000 HDFC Bank 243,138 - 243,138
------------------ ----------- ----------
Chemicals - 0.33%
50,000 Reliance Industries Ltd. - 375,083 375,083
------------------ ----------- ----------
Construction/Building Materials - 0.05%
24,250 Associated Cement Co. 58,189 - 58,189
------------------ ----------- ----------
Diversified Industries - 0.09%
22,000 Larsen & Toubro 95,643 - 95,643
------------------ ----------- ----------
Household Goods & Textiles - 0.66%
137,000 Hindustan Lever Ltd* 736,242 - 736,242
1,000 Reliance Industries 7,501 - 7,501
------------------ ----------- ----------
743,743 - 743,743
------------------ ----------- ----------
Oil Exploration & Production - 0.31%
60,000 Hindustan Lever - 322,442 322,442
11,050 Hindustan Petroleum Corp. - 28,440 28,440
------------------ ----------- ----------
- 350,882 350,882
------------------ ----------- ----------
Oil & Gas - 0.31%
86,100 Bharat Petroleum Corp 223,326 122,508 345,834
------------------ ----------- ----------
Pharmaceuticals - 0.47%
43,150 Randbaxy Laboratories Ltd. 396,743 136,574 533,317
------------------ ----------- ----------
Support Services - 2.81%
13,500 Satyam Computer Services Ltd. 365,845 - 365,845
11,700 Infosys Technology Ltd 2,038,021 754,822 2,792,843
------------------ ----------- ----------
2,403,866 754,822 3,158,688
------------------ ----------- ----------
Telecommunications - 1.14%
19,000 Zee Telefilms Ltd* 184,623 - 184,623
13,000 Videsh Sanchar Nigam Ltd. GDR 141,050 - 141,050
13,000 Videsh Sanchar Nigam Ltd. 246,033 - 246,033
146,900 Mahanagar Telephone Nigam Ltd 322,295 241,338 563,633
7,500 Cidesh Sanchar Nigam Ltd. - 141,942 141,942
------------------ ----------- ----------
894,001 383,280 1,277,281
------------------ ----------- ----------
Transportation - 0.00%
10 Gesco Corp Ltd.* 3 - 3
90 Great Eastern Ship 35 - 35
------------------ ----------- ----------
38 - 38
------------------ ----------- ----------
TOTAL INDIA COMMON STOCKS 5,058,687 2,123,149 7,181,836
------------------ ----------- ----------
Indonesia - 0.86%
Communications - 0.32%
1,057,300 P.T. Telekomunikasi Indonesia 196,167 167,948 364,115
------------------ ----------- ----------
Foods - 0.54%
247,500 H.M. Sampoerna 261,000 110,250 371,250
334,000 P.T. Indofoods Sukses Makmur* 114,506 116,922 231,428
------------------ ----------- ----------
375,506 227,172 602,678
------------------ ----------- ----------
TOTAL INDONESIA COMMON STOCK 571,673 395,120 966,793
------------------ ----------- ----------
Israel - 4.17%
Banks - 1.48%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
COMBINED PACE INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
--------- ------------------ ----------- ------------------
<S> <C> <C> <C>
441,680 Bank Hapoalim B.M. 1,257,006 - 1,257,006
199,030 BkLeumiLe-Israel B.M. 403,413 - 403,413
------------------ ----------- -----------
1,660,419 - 1,660,419
Computer Hardware - 0.05%
5,500 Scitex Corp. Ltd.* 58,781 - 58,781
------------------ ----------- -----------
Computer Software - 1.10%
10,640 Check Point Software Tech Ltd.* 1,234,240 - 1,234,240
------------------ ----------- -----------
Electronic & Electrical Equipment - 0.19%
2,890 Nice Systems Ltd.* 211,693 - 211,693
------------------ ----------- -----------
Pharmaceuticals - 0.77%
14,260 Teva Pharmaceutical Industries Ltd., ADR 866,295 - 866,295
------------------ ----------- -----------
Retailers, Food - 0.17%
18,134 Blue Square-Israel Ltd ADS(1) 191,540 - 191,540
------------------ ----------- -----------
Telecommunications - 0.41%
8,080 ECI Telecommunications Ltd. (1) 287,850 - 287,850
2,200 Gilat Satellite Networks* 176,000 - 176,000
------------------ ----------- -----------
463,850 - 463,850
------------------ ----------- -----------
TOTAL ISRAEL COMMON STOCK 4,686,818 - 4,686,818
------------------ ----------- -----------
KOREA - 12.27%
Banks - 1.78%
103,731 Kookmin Bank 692,298 538,448 1,230,746
75,730 Shinhan Bank 558,853 207,432 766,285
------------------ ----------- -----------
1,251,151 745,880 1,997,031
------------------ ----------- -----------
Communications - 3.76%
26,600 Korea Telecom 1,879,329 21,437 1,900,766
7,500 Korea Telecom ADR - 280,313 280,313
7,020 SK Telecom 1,344,258 403,277 1,747,535
12,009 Turbo Tek Co. Ltd. 78,823 - 78,823
7,210 SK Telecom Ltd. ADS - 219,905 219,905
------------------ ----------- -----------
3,302,410 924,932 4,227,342
------------------ ----------- -----------
Electrical Appliances - 4.43%
26,000 Hyundai Electronics 405,104 - 405,104
17,322 Samsung Electronic Corp 3,013,531 1,562,239 4,575,770
------------------ ----------- -----------
3,418,635 1,562,239 4,980,874
------------------ ----------- -----------
Electricity & Gas - 2.31%
89,920 Korea Electric Power Corp. 1,664,279 928,444 2,592,723
------------------ ----------- -----------
TOTAL KOREA COMMON STOCK 9,636,475 4,161,495 13,797,970
------------------ ----------- -----------
MALAYSIA - 4.64%
Banks - 0.72%
217,500 Malayan Banking Berhad 411,868 395,171 807,039
------------------ ----------- -----------
Commerce/Industrial - 0.38%
131,000 AMM Holding Berhad 430,921 - 430,921
------------------ ----------- -----------
Communications - 0.79%
54,000 Digi.com Berhad* 86,684 - 86,684
39,000 Digi Swisscom - 62,605 62,605
237,500 Telekom Malaysia Berhad 648,237 95,513 743,750
------------------ ----------- -----------
734,921 158,118 893,039
------------------ ----------- -----------
Construction - 0.63%
210,000 Gamuda Berhad - 237,632 237,632
229,000 United Enigeers (Malaysia) Ltd. Berhad 330,474 139,579 470,053
------------------ ----------- -----------
330,474 377,211 707,685
------------------ ----------- -----------
Electricity & Gas - 1.15%
377,000 Tenga National Berhad 879,211 410,526 1,289,737
------------------ ----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
COMBINED PACE INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
--------- ------------------ ----------- ------------------
<S> <C> <C> <C>
Miscellaneous Financial - 0.15%
151,000 Arab Malaysian Finance Berhad - 169,279 169,279
------------------ ----------- -----------
Miscellaneous Manufacturing - 0.14%
20,000 Malaysian Pacific Industries Berhad - 157,895 157,895
------------------ ----------- -----------
Services - 0.68%
108,000 Genting Berhad 338,210 - 338,210
188,000 Resorts World Berhad 67,895 357,579 425,474
------------------ ----------- -----------
406,105 357,579 763,684
------------------ ----------- -----------
TOTAL MALAYSIA COMMON STOCKS 3,193,500 2,025,779 5,219,279
------------------ ----------- -----------
MEXICO - 7.75%
Alcoholic Beverages - 0.19%
94,500 Grupo Modelo S.A. de CV 218,946 - 218,946
------------------ ----------- -----------
Banks - 0.62%
145,100 Grupo Financiero Banamex Accival Series B* 695,600 - 695,600
------------------ ----------- -----------
Breweries, Pubs & Restaurants - 0.63%
Fomento Economico Mexica S.A. de C.V. Series
170,400 B and 4 units Series D 704,087 - 704,087
------------------ ----------- -----------
Construction - 0.17%
128,000 Consorico ARA S.A de C.V.* 188,597 - 188,597
------------------ ----------- -----------
Construction/Building Materials - 0.69%
165,820 Cemex SA 777,226 - 777,226
------------------ ----------- -----------
Media - 1.12%
19,500 Grupo Televisa SA de CV GDS* 1,260,188 - 1,260,188
------------------ ----------- -----------
Paper, Packaging & Printing - 0.53%
206,750 Kimberly-Clark de Mexico SA DE CV 599,323 - 599,323
------------------ ----------- -----------
Retailers, Gereral - 0.80%
405,000 Walmart de Mexico SA de CV Series C* 901,586 - 901,586
------------------ ----------- -----------
Telecommunications - 2.99%
64,000 Telefonos de Mexico SA DE CV ADR(1) 3,368,000 - 3,368,000
------------------ ----------- -----------
TOTAL MEXICO COMMON STOCK 8,713,553 - 8,713,553
------------------ ----------- -----------
NEW ZEALAND - 0.16%
Communications - 0.16%
57,300 Telecom Corp of New Zealand Ltd. - 185,241 185,241
------------------ ----------- -----------
PERU - 0.23%
Banks - 0.15%
21,500 Credicorp Ltd ADR 169,312 - 169,312
------------------ ----------- -----------
Mining - 0.07%
5,100 Compania De Minas Buenaventura SA ADS 84,150 - 84,150
------------------ ----------- -----------
TOTAL PERU COMMON STOCKS 253,462 - 253,462
------------------ ----------- -----------
PHILIPPINES - 0.46%
Banks - 0.03%
9,020 Metropolitan Bank & Trust Co. - 33,511 33,511
------------------ ----------- -----------
Commerce / Industrial - 0.04%
319,080 Ayala Corp - 45,431 45,431
------------------ ----------- -----------
Communications - 0.23%
17,480 Philippine Long Distance Telephone Co.* 202,416 58,131 260,547
------------------ ----------- -----------
Electricity & Gas - 0.16%
137,784 Manila Electric Co. 72,805 104,981 177,786
------------------ ----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
COMBINED PACE INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
--------- ------------------ ----------- -------------------
<S> <C> <C> <C>
TOTAL PHILIPPINES COMMON STOCK 275,221 242,054 517,275
------------------ ----------- -----------
POLAND - 1.19%
Banks - 0.30%
5,500 BRE Bank SA 172,439 - 172,439
7,400 Powszechny Bank Kredytowy SA GDR 169,090 - 169,090
------------------ ----------- -----------
341,529 - 341,529
------------------ ----------- -----------
Diversified Holdings Companies - 0.45%
45,590 Elekrtrim 509,738 - 509,738
------------------ ----------- -----------
Metals & Mining - 0.24%
20,620 Kghm Polska Miedz SA 271,153 - 271,153
------------------ ----------- -----------
Telecommunications - 0.20%
31,000 Telekomunika Polska S.A.GDR 221,650 - 221,650
------------------ ----------- -----------
TOTAL POLAND COMMON STOCK 1,344,070 - 1,344,070
------------------ ----------- -----------
RUSSIA - 2.66%
Oil & Gas - 2.05%
35,150 Gazprom ADR 223,202 - 223,202
23,805 Lukoil Holding ADR 1,266,426 - 1,266,426
54,050 Surgutneftegaz ADR(1) 816,155 - 816,155
------------------ ----------- -----------
2,305,783 - 2,305,783
------------------ ----------- -----------
Telecommunications - 0.35%
10,029 Mobile Telesystems ADR * 228,160 - 228,160
11,600 Rostelecom ADR 164,575 - 164,575
------------------ ----------- -----------
392,735 - 392,735
------------------ ----------- -----------
Utilities - 0.26%
20,980 Unified Energy System 293,720 - 293,720
------------------ ----------- -----------
TOTAL RUSSIA COMMON STOCK 2,992,238 - 2,992,238
------------------ ----------- -----------
SINGAPORE - 2.49%
Banks - 0.74%
69,339 DBS Group Holdings - 835,916 835,916
------------------ ----------- -----------
Communications - 0.11%
17,200 Datacraft Asia ADR - 128,140 128,140
------------------ ----------- -----------
Electrical Appliances - 0.13%
21,000 Chartered Semiconductors - 151,415 151,415
------------------ ----------- -----------
Miscellaneous Manufacturing - 0.18%
18,000 Venture Manufacturing Ltd. - 205,578 205,578
------------------ ----------- -----------
Real Estate - 0.34%
46,000 City Development Ltd. - 196,349 196,349
127,000 DBS Land Ltd. - 183,872 183,872
------------------ ----------- -----------
- 380,221 380,221
------------------ ----------- -----------
Services - 0.39%
25,642 Singapore Press Holdings - 436,327 436,327
------------------ ----------- -----------
Shipping - 0.26%
60,000 Keppel Telecom & Transportation - 71,987 71,987
125,000 Neptune Orient Lines Ltd. - 136,994 136,994
17,000 Sembcorp Logistics - 84,331 84,331
------------------ ----------- -----------
- 293,312 293,312
------------------ ----------- -----------
Transportation - 0.33%
37,000 Singapore International Airlines - 373,489 373,489
------------------ ----------- -----------
TOTAL SINGAPORE COMMON STOCK - 2,804,398 2,804,398
------------------ ----------- -----------
SOUTH AFRICA - 4.58%
Banks - 0.57%
260,400 African Bank Investment Ltd* 304,922 - 304,922
91,672 Amalgamated Bank of South Africa Group Ltd. 331,916 - 331,916
------------------ ----------- -----------
636,838 - 636,838
------------------ ----------- -----------
Diversified Industries - 0.22%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
COMBINED PACE INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
--------- ------------------ ----------- ------------------
<S> <C> <C> <C>
41,032 Barlow Ltd 247,607 - 247,607
------------------ ----------- -----------
Financial Service - 0.33%
369,475 FistRand Ltd 372,660 - 372,660
------------------ ----------- -----------
Household Goods & Textiles - 0.34%
572,691 Profurn 378,503 - 378,503
------------------ ----------- -----------
Insurance - 0.34%
322,465 Sanlam Ltd 386,865 - 386,865
------------------ ----------- -----------
Mining - 0.71%
21,900 Anglo American Platinum 648,189 - 648,189
11,000 Johnnic Holdings Ltd 150,144 - 150,144
------------------ ----------- -----------
798,333 - 798,333
------------------ ----------- -----------
Oil Explorations & Production - 0.49%
86,360 Sasol Ltd 545,954 - 545,954
------------------ ----------- -----------
Other Financial - 0.14%
33,100 Fedsure Holdings Ltd 152,422 - 152,422
------------------ ----------- -----------
Paper, Packaging & Printing - 0.65%
117,100 Nampak Ltd 216,198 - 216,198
63,200 Sappi 519,402 - 519,402
------------------ ----------- -----------
735,600 - 735,600
------------------ ----------- -----------
Retailers, General - 0.03%
131,964 LA Retail Stores Ltd. 32,233 - 32,233
------------------ ----------- -----------
Telecommunications - 0.77%
100,825 Dimension Data Holding PLC(1)* 864,835 - 864,835
------------------ ----------- -----------
TOTAL SOUTH AFRICA COMMON STOCK 5,151,850 - 5,151,850
------------------ ----------- -----------
TAIWAN - 12.84%
Chemicals - 1.28%
712,485 Nan Ya Plastic 896,157 539,842 1,435,999
------------------ ----------- -----------
Commerce / Industrial - 0.35%
50,121 Asustek Computer Inc. GDR - 392,757 392,757
------------------ ----------- -----------
Electrical Appliances - 9.67%
163,200 Acer Communications & Mutimedia Inc 457,865 - 457,865
243,595 Acer Inc. - 314,215 314,215
355,200 Compeq Manufacturing Ltd. 1,512,906 560,336 2,073,242
13,080 Cosmo Electronics Corp 27,839 - 27,839
170,700 DBTEL Inc 308,262 - 308,262
265,690 Macronix International 399,854 152,774 552,628
70,000 Realtek Semiconductor Corp 435,666 - 435,666
127,680 Siliconware Precision Industries Co. 216,163 - 216,163
875,417 Taiwan Semiconductor Manufacturing Co. Ltd. 1,808,552 1,776,677 3,585,229
725,200 United Microelectronics Corp 1,753,950 - 1,753,950
35,000 Via Technologies Inc 579,007 - 579,007
234,120 Winbond Electronics Corp 577,561 - 577,561
------------------ ----------- -----------
8,077,625 2,804,002 10,881,627
------------------ ----------- -----------
Machinery/Engine Services - 0.28%
40,300 Hon Hai Precision 313,199 - 313,199
------------------ ----------- -----------
Miscellaneous Financial - 0.27%
290,000 Yuanta Core Pacific Securities Co 306,740 - 306,740
------------------ ----------- -----------
Miscellaneous Manufacturing - 0.47%
75,600 Ambit Microsystems Corp 526,591 - 526,591
------------------ ----------- -----------
Precision Machinery - 0.25%
89,988 Wintek Corp 284,386 - 284,386
------------------ ----------- -----------
Telecommunications - 0.27%
99,600 Systex Corp 300,310 - 300,310
------------------ ----------- -----------
TOTAL TAIWAN COMMON STOCK 10,705,008 3,736,601 14,441,609
------------------ ----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
COMBINED PACE INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
--------- ------------------ ----------- ------------------
<S> <C> <C> <C> <C>
THAILAND - 1.52%
Banks - 0.15%
298,000 Thai Farmers Bank PCL* 90,610 82,478 173,088
------------------ ----------- -----------
Communications - 0.99%
51,600 Advanced Info Services Public Co. Ltd.* 485,383 89,061 574,444
679,500 TelecomAsia Corp Public Co. Ltd.* 285,963 174,492 460,455
21,000 Total Access Communication - 74,340 74,340
------------------ ----------- -----------
771,346 337,893 1,109,239
------------------ ----------- -----------
Construction - 0.28%
25,800 Siam Cement Co.* 229,235 90,455 319,690
------------------ ----------- -----------
Electricity & Gas - 0.10%
99,000 Electricity Generating Public Co. Ltd. - 110,213 110,213
------------------ ----------- -----------
TOTAL THAILAND COMMON STOCK 1,091,191 621,039 1,712,230
------------------ ----------- -----------
TURKEY - 3.23%
Banks - 1.75%
28,794,800 Akbank TAS 203,945 - 203,945
25,142,500 Turkiye Is Bankasi (Isbank) 514,445 - 514,445
38,264,950 Turkyie Garanti Bankasi 433,631 - 433,631
77,261,021 Yapi Ce Kredi Bankasi AS 814,746 - 814,746
------------------ ----------- -----------
1,966,767 - 1,966,767
------------------ ----------- -----------
Breweries, Pubs and Restaurants - 0.17%
3,538,000 Anadolu Efes Biracilik ve Malt Sanayii A.S.* 191,759 - 191,759
------------------ ----------- -----------
Construction/Building Materials - 0.04%
3,538,000 Akcansa Cimento S.A. 48,447 - 48,447
------------------ ----------- -----------
Diversified Industrials - 0.21%
3,926,160 KOC Holding 234,822 - 234,822
------------------ ----------- -----------
Electrical Equipment - 0.21%
1,111,600 Vestel Electronic Sanayi ve Ticaret* 236,194 - 236,194
------------------ ----------- -----------
Financial Institutions/Services - 0.16%
16,713,591 Haci Omer Sabanci 176,251 - 176,251
------------------ ----------- -----------
Household Goods & Textiles - 0.14%
4,305,500 Arcelik A.S 160,944 - 160,944
------------------ ----------- -----------
Media - 0.16%
7,757,225 Dogan Yayin Holding SA 107,443 - 107,443
6,430,522 Hurriyet Gazete 67,812 - 67,812
------------------ ----------- -----------
175,255 - 175,255
------------------ ----------- -----------
Retail Trade - 0.28%
1,906,506 Migros Turk T.A.S. 315,075 - 315,075
------------------ ----------- -----------
Steel & Other Materials - 0.12%
3,681,000 Eregli Demir Celik 131,806 - 131,806
------------------ ----------- -----------
TOTAL TURKEY COMMON STOCK 3,637,320 - 3,637,320
------------------ ----------- -----------
UNITED STATES - 0.25%
Electrical Appliances - 0.25%
44 Acer Inc - 276,563 276,563
------------------ ----------- -----------
ZIMBABWE - 0.38%
Telecommunications - 0.38%
1,092,000 Econet Wireless Holding* 427,676 - 427,676
------------------ ----------- -----------
TOTAL COMMON STOCKS (COST - $97,400,275) 73,552,856 30,460,441 104,013,297
------------------ ----------- -----------
Preferred Stocks - 4.93%
BRAZIL - 4.93%
Banks - 1.76%
96,155,131 Banco Bradesco S.A. 836,956 - 836,956
2,940,000 Banco Itau S.A. 274,107 - 274,107
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
COMBINED PACE INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
--------- ------------------ ----------- ------------------
<S> <C> <C> <C>
31,300 Companhia Vale Do Rio Doce "A" 867,583 - 867,583
------------------ ----------- -----------
1,978,646 - 1,978,646
------------------ ----------- -----------
Breweries, Pubs, & Restaurants - 0.36%
382,000 Companhia Cervejaria Brahma 402,445 - 402,445
------------------ ----------- -----------
Building Materials & Merchants - 0.20%
1,380,000 Companhia Cimento Portland Itau 221,578 - 221,578
------------------ ----------- -----------
Electricity - 0.61%
49,600 Companhia Paranaense de Energia Copel ADR 461,900 - 461,900
3,309,030 Eletropaulo Electricidade Sao Paulo 224,641 - 224,641
------------------ ----------- -----------
686,541 - 686,541
------------------ ----------- -----------
Oil Exploration & Production - 0.98%
36,190 Petrol Brasileiro Petrobras 954,600 - 954,600
5,600 Petrol Brasileiros 146,389 - 146,389
------------------ ----------- -----------
1,100,989 - 1,100,989
------------------ ----------- -----------
Telecommunications - 1.03%
43,550,000 Tele Centro Sul Pa 626,384 - 626,384
35,672,527 Telesp Cellular Participacoes 532,576 - 532,576
------------------ ----------- -----------
1,158,960 - 1,158,960
------------------ ----------- -----------
TOTAL PREFERRED STOCK (COST - $3,904,532) 5,549,159 - 5,549,159
------------------ ----------- -----------
COMBINED
NUMBER OF
WARRANTS/
RIGHTS
---------
WARRANTS - 0.19%
MEXICO - 0.00%
Construction/Building Materials - 0.00%
12,000 Cemex Appreciation* 3,363 - 3,363
------------------ ----------- -----------
SWITZERLAND - 0.19%
Banks - 0.19%
3,000 UBS AG 214,380 - 214,380
------------------ ----------- -----------
TOTAL WARRANTS (COST - $255,945) 217,743 - 217,743
------------------ ----------- -----------
RIGHTS - 0.11%
BRAZIL - 0.00%
Banks/Retail - 0.00%
11,000 Companhia Vale do Rio Doce - - -
SWITZERLAND - 0.11%
Banks - 0.11%
33,000 UBS AG 124,509 - 124,509
THAILAND - 0.00%
Communications - 0.00%
133,263 TelecomAisa Corporation Public Co. Ltd.* - - -
------------------ ----------- -----------
TOTAL RIGHTS (COST $96,388) 124,509 - 124,509
------------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
PRINCIPAL PACE INTERNATIONAL PW ASIA PACE INTERNATIONAL
AMOUNT MATURITY INTEREST EMERGING MARKETS PACIFIC EMERGING MARKETS
(000) DATE RATE EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
--------- -------- -------- ------------------ ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENT - 0.50%
$ 558 Repurchase Agreement dated 7/31/00 with State
Street Bank & Trust Company, collateralized
by $164,150 U.S. Treasury Notes, 6.625% due
3/31/02; (value-$168,254) and $311,791 U.S.
Treasury Bonds, 8.125% due 8/15/19;
(value-$401,041); proceeds: $558,081
(cost - $558,000) 08/01/00 5.250% 558,000 - 558,000
----------- ----------- ------------
Total Investments (cost - $102,215,140) -
98.21% 80,002,267 30,460,441 110,462,708
Other assets (liabilities) in excess of
(liabilities) other assets - 1.79% 2,176,246 (163,172) 2,013,074
----------- ----------- ------------
Net Assets - 100.00% $82,178,513 $30,297,269 $112,475,782
=========== =========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
COMBINED PACE INTERNATIONAL PW ASIA PACE INTERNATIONAL
NUMBER OF EMERGING MARKETS PACIFIC EMERGING MARKETS
SHARES EQUITY INVESTMENTS GROWTH FUND EQUITY INVESTMENTS
--------- ------------------ ----------- ------------------
<S> <C> <C> <C>
* Non-income producing security
ADR American Depositary Receipt.
ADS American Depositary Shares.
GDR Global Depositary Receipt.
GDS Global Depositary Shares.
(1) Security, or a portion thereof, was on loan at July 31, 2000.
</TABLE>
See accompanying notes to pro forma financial statements.
<PAGE>
PACE International Emerging Markets Equity Investments
PaineWebber Asia Pacific Growth Fund
Notes to Pro Forma Financial Statements
For the year ended July 31, 2000 (unaudited)
Basis of Presentation:
Subject to the approval of the Agreement and Plan of Reorganization and
Termination ("Plan") by the shareholders of PaineWebber Asia Pacific Growth Fund
("Asia Pacific Growth"), PACE International Emerging Markets Equity Investments
("International Emerging Markets") would acquire the assets of Asia Pacific
Growth in exchange solely for the assumption by International Emerging Markets
of Asia Pacific Growth's assets and liabilities and shares of International
Emerging Markets that correspond to the outstanding shares of Asia Pacific
Growth. The number of shares to be received would be based on the relative net
asset value of International Emerging Markets' shares on the effective date of
the Plan and Asia Pacific Growth will be terminated as soon as practicable
thereafter.
The pro forma financial statements reflect the financial position of
International Emerging Markets and Asia Pacific Growth at July 31, 2000 and the
combined results of operations of International Emerging Markets and Asia
Pacific Growth (each a "Fund" and, collectively, the "Funds") for the year ended
July 31, 2000.
As a result of the Plan, the investment advisory and administration fee will
decrease due to the lower fee schedule of International Emerging Markets. Asia
Pacific Growth currently pays Rule 12b-1 distribution or service fees;
International Emerging Markets currently does not. Other fixed expenses will be
reduced due to the elimination of duplicative expenses. In addition, the pro
forma statement of assets and liabilities has not been adjusted as a result of
the proposed transaction because such adjustment would not be material. The cost
of approximately $159,000 associated with the merger will be paid by Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset
management subsidiary of PaineWebber Incorporated (a wholly owned indirect
subsidiary of UBS AG), so that each Fund bears no expenses of the
Reorganization. These costs are not included in the pro forma statement of
operations.
The pro forma financial statements are presented for the information of the
reader and may not necessarily be representative of what the actual combined
financial statements would have been had the Reorganization occurred August 1,
1999. The pro forma financial statements should be read in conjunction with the
historical financial statements of the constituent Funds included in or
incorporated by reference in the applicable statement of additional information.
Significant Accounting Policies:
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles that require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to a fair
<PAGE>
statement of the results for the interim period presented. The following is a
summary of significant accounting policies followed by the Fund.
Valuation of Investments-Each Fund calculates its net asset value based on the
current market value for its portfolio securities. Each Fund normally obtains
market values for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins, or by the Fund's sub-adviser. If a market
value is not available from an independent pricing source for a particular
security, that security is valued at fair value as determined in good faith by
or under the direction of the Fund's board of trustees (the "board"). The
amortized cost method of valuation, which approximates market value, generally
is used to value short-term debt instruments with sixty days or less remaining
to maturity, unless the board determines that this does not represent fair
value. Each Fund's investments are valued using the amortized cost method of
valuation. All investments quoted in foreign currencies will be valued daily in
U.S. dollars on the basis of the foreign currency exchange rates prevailing at
the time such valuation is determined by the Fund's custodian.
Foreign currency exchange rates are generally determined prior to the close of
the New York Stock Exchange ("NYSE"). Occasionally, events affecting the value
of foreign investments and such exchange rates occur between the time at which
they are determined and the close of the NYSE, which will not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities or currency exchange rates occur during such time
periods, the securities will be valued at their value as determined in good
faith by or under the direction of the board.
<PAGE>
PART C. OTHER INFORMATION
-------------------------
Item 15. Indemnification
---------------
Article IX, Section 2 of the Amended and Restated Trust Instrument of
PaineWebber PACE Select Advisors Trust ("Trust Instrument") provides that the
Registrant will indemnify its trustees, officers, employees, investment managers
and administrators and investment advisers to the fullest extent permitted by
law against claims and expenses asserted against or incurred by them by virtue
of being or having been a trustee, officer, employee, investment manager and
administrator or investment adviser; provided that (i) no such person shall be
indemnified where there has been an adjudication or other determination, as
described in Article IX, that such person is liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office,
or did not act in good faith in the reasonable belief that his or her action was
in the best interest of the Registrant, or (ii) no such person shall be
indemnified where there has been a settlement, unless there has been a
determination that such person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office; such determination shall be made (A) by the court or other
body approving the Settlement, (B) by the vote of at least a majority of those
trustees who are neither Interested Persons of the trust nor are parties to the
proceeding based upon a review of readily available facts (as opposed to a full
trial-type inquiry), or (C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full trial-type
inquiry).
"Interested Person" has the meaning provided in the Investment Company Act
of 1940, as amended from time to time. Article IX, Section 2(d) of the Trust
Instrument also provides that the Registrant may maintain insurance policies
covering such rights of indemnification.
Article IX, Section 1 of the Trust Instrument provides that the trustees
and officers of the Registrant (i) shall not be personally liable to any person
contracting with, or having a claim against, the Trust, and (ii) shall not be
liable for neglect or wrongdoing by them or any officer, agent, employee or
investment adviser of the Registrant, provided they have exercised reasonable
care and have acted under the reasonable belief that their actions are in the
best interest of the Registrant.
Article X, Section 2 of the Trust Instrument provides that, subject to the
provisions of Article IX, the trustees shall not be liable for (i) errors of
judgment or mistakes of fact or law or (ii) any act or omission made in
accordance with advice of counsel or other experts, or (iii) failure to follow
such advice, with respect to the meaning and operation of the Trust Instrument.
Registrant undertakes to carry out all indemnification provisions of its
Trust Instrument and By-laws in accordance with Investment Company Act Release
No. 11330 (September 4, 1980) and successor releases.
Section 9 of the Investment Management and Administration Agreement
("Management Agreement") with Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins") provides that Mitchell Hutchins shall not be liable for any error of
judgment or mistake of law or for any loss suffered by any series of the
Registrant in connection with the matters to which the Management Agreement
relates, except for a loss resulting from the willful misfeasance, bad faith, or
gross negligence of Mitchell Hutchins in the performance of its duties or from
its reckless disregard of its obligations and duties under the Management
Agreement. Section 10 of the Management Agreement provides that the Trustees
and shareholders shall not be liable for any obligations of the Registrant or
any series under the Management Agreement and that Mitchell Hutchins shall look
only to the assets and property of the Registrant in
C-1
<PAGE>
settlement of such right or claim and not to the assets and property of the
Trustees or shareholders.
Section 6 of the Sub-Advisory Agreement provides that the Sub-Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the portfolio, the Registrant or its shareholders or by Mitchell
Hutchins in connection with the matters to which the Sub-Advisory Agreement
relates, except for a loss resulting from the willful misfeasance, bad faith, or
gross negligence on its part in the performance of its duties or from its
reckless disregard of its obligations and duties under the Management Agreement.
Section 9 of the Distribution Contract provides that the Registrant will
indemnify Mitchell Hutchins and its officers, directors and controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by Mitchell Hutchins to the Registrant for use in the Registration
Statement; and provided that this indemnity agreement shall not protect any such
persons against liabilities arising by reason of their bad faith, gross
negligence or willful misfeasance; and shall not inure to the benefit of any
such persons unless a court of competent jurisdiction or controlling precedent
determines that such result is not against public policy as expressed in the
Securities Act of 1933. Section 9 of the Distribution Contract also provides
that Mitchell Hutchins agrees to indemnify, defend and hold the Registrant, its
officers and Trustees free and harmless of any claims arising out of any alleged
untrue statement or any alleged omission of material fact contained in
information furnished by Mitchell Hutchins for use in the Registration Statement
or arising out of an agreement between Mitchell Hutchins and any retail dealer,
or arising out of supplementary literature or advertising used by Mitchell
Hutchins in connection with the Contract.
Section 9 of the Dealer Agreement contains provisions similar to Section 9
of the Distribution Contract, with respect to PaineWebber Incorporated
("PaineWebber").
Section 15 of the Distribution Contract contains provisions similar to
Section 10 of the Management Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be provided to trustees, officers and controlling
persons of the Trust, pursuant to the foregoing provisions or otherwise, the
Trust has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of expenses
incurred or paid by a trustee, officer or controlling person of the Trust in
connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Trust by such
trustee, officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 16. Exhibits
--------
(1) (a) Certificate of Business Trust effective September 9, 1994 1/
-
(b) Amended and Restated Trust Instrument 2/
-
C-2
<PAGE>
(2) Amended and Restated By-Laws 2/
-
(3) Copies of any voting trust agreement - none
(4) A copy of the Agreement and Plan of Reorganization and Termination is
included in the Combined Proxy Statement/Prospectus as Appendix A
thereto and incorporated by reference.
(5) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 3/
-
(6) (a) Investment Management and Administration Agreement 4/
-
(b) Sub-Advisory Agreement with Pacific Investment Management Company
LLC with respect to PACE Government Securities Fixed Income
Investments dated as of October 10, 2000 2/
-
(c) Sub-Advisory Agreement with Metropolitan West Asset Management
LLC with respect to PACE Intermediate Fixed Income Investments
dated as of October 10, 2000 2/
-
(d) Sub-Advisory Agreement with Pacific Investment Management Company
LLC with respect to PACE Strategic Fixed Income Investments dated
as of May 5, 2000 2/
-
(e) Sub-Advisory Agreement with Standish, Ayer & Wood, Inc. with
respect to PACE Municipal Fixed Income Investments dated as of
October 10, 2000 2/
-
(f) Sub-Advisory Agreement with Rogge Global Partners plc with
respect to PACE Global Fixed Income Investments dated as of
October 10, 2000 2/
-
(g) Sub-Advisory Agreement with Fischer Francis Trees & Watts, Inc.
with respect to PACE Global Fixed Income Investments dated as of
October 10, 2000 2/
-
(h) Sub-Advisory Agreement with State Street Global Advisors with
respect to PACE Large Company Value Equity Investments dated as
of October 10, 2000 2/
-
(i) Sub-Advisory Agreement with Institutional Capital Corporation
with respect to PACE Large Company Value Equity Investments dated
as of July 1, 2000 2/
-
(j) Sub-Advisory Agreement with Westwood Management Corporation with
respect to PACE Large Company Value Equity Investments dated as
of July 1, 2000 2/
-
(k) Sub-Advisory Agreement with Alliance Capital Management L.P. with
respect to PACE Large Company Growth Equity Investments dated as
of October 10, 2000 2/
-
(l) Sub-Advisory Agreement with State Street Global Advisors with
respect to PACE Large Company Growth Equity Investments dated as
of October 10, 2000 2/
-
(m) Sub-Advisory Agreement with Ariel Capital Management, Inc. with
respect to PACE Small/Medium Company Value Equity Investments
dated as of October 4, 1999 1/
-
(n) Sub-Advisory Agreement with ICM Asset Management, Inc. with
respect to PACE Small/Medium Company Value Equity Investments
dated as of October 10, 2000 2/
-
(o) Sub-Advisory Agreement with Delaware Management Company with
respect to PACE Small/Medium Company Growth Equity Investments
dated as of December 16, 1996 5/
-
C-3
<PAGE>
(p) Sub-Advisory Agreement with Martin Currie Inc. with
respect to PACE International Equity Investments dated as of
October 10, 2000 6/
-
(q) Sub-Advisory Agreement with Schroder Investment Management North
America Inc. with respect to PACE International Emerging Markets
Equity Investments dated as of June 15, 1995 4/
-
(7) (a) Distribution Contract 2/
-
(b) Dealer Agreement 2/
-
(8) Bonus, profit sharing or pension plans - none
(9) Custodian Agreement 1/
-
(10) Plan pursuant to Rule 12b-1
(a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
A shares 2/
-
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
B shares 2/
-
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
C shares 2/
-
(d) Plan pursuant to Rule 18f-3 7/
-
(11) Opinion and consent of Counsel on legality of shares (filed herewith)
(12) Opinion and consent of Counsel on tax matters (to be filed)
(13) Transfer Agency Agreement 8/
-
(14) Auditors' consent (filed herewith)
(15) Financial Statements omitted from prospectus - none
(16) (a) Powers of Attorney for Ms. Alexander and Messrs. Beaubien, Bewkes,
Hewitt, Janklow, White and Woodward 9/
-
(b) Power of Attorney for Mr. Storms 10/
--
(17) Additional Exhibits - none
1/ Incorporated by reference from Post-Effective Amendment No. 8 to
-
registration statement, SEC File No. 33-87254, filed December 1, 1999.
2/ Incorporated by reference from Registrant's N-14 registration statement,
-
SEC File No. 333-49052, filed November 1, 2000.
3/ Incorporated by reference from Articles IV, VI, IX and X of Registrant's
-
Trust Instrument and from Articles V and IX of Registrant's By-Laws.
4/ Incorporated by reference from Post-Effective Amendment No. 1 to
-
registration statement, SEC File No. 33-87254, filed February 23, 1996.
5/ Incorporated by reference from Post-Effective Amendment No. 4 to
-
registration statement, SEC File No. 33-87254, filed November 13, 1997.
C-4
<PAGE>
6/ Incorporated by reference from Post-Effective Amendment No. 10 to
-
registration statement, SEC File No. 33-87254, filed November 9, 2000.
7/ Incorporated by reference from Registrant's N-14 registration statement,
-
SEC File No. 333-49850, filed November 13, 2000.
8/ Incorporated by reference from Post-Effective Amendment No. 2 to
-
registration statement, SEC File No. 33-87254, filed October 16, 1996.
9/ Incorporated by reference from Post-Effective Amendment No. 9 to
-
registration statement, SEC File No. 33-87254, filed September 29, 2000.
10/ Incorporated by reference from Registrant's N-14 registration statement,
--
SEC File No. 333-50238, filed November 17, 2000.
Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public re-offering
of the securities registered through the use of a prospectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
re-offering prospectus will contain the information called for by the applicable
registration form for re-offerings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new Registration Statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 4th day of December, 2000.
PAINEWEBBER PACE SELECT ADVISORS TRUST
By: /s/ Dianne E. O'Donnell
-----------------------
Dianne E. O'Donnell
Vice President and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Brian M. Storms President and Trustee December 4, 2000
--------------------
Brian M. Storms ** (Chief Executive Officer)
/s/ David J. Beaubien Trustee and Chairman December 4, 2000
----------------------
David J. Beaubien * of the Board of Trustees
/s/ Margo N. Alexander Trustee December 4, 2000
----------------------
Margo N. Alexander *
/s/ E. Garrett Bewkes, Jr. Trustee December 4, 2000
--------------------------
E. Garrett Bewkes, Jr. *
/s/ William W. Hewitt, Jr. Trustee December 4, 2000
--------------------------
William W. Hewitt, Jr. *
/s/ Morton L. Janklow Trustee December 4, 2000
----------------------
Morton L. Janklow *
/s/ William D. White Trustee December 4, 2000
---------------------
William D. White *
/s/ M. Cabell Woodward, Jr. Trustee December 4, 2000
---------------------------
M. Cabell Woodward, Jr. *
/s/ Paul H. Schubert Vice President and Treasurer (Chief December 4, 2000
--------------------
Paul H. Schubert Financial and Accounting Officer)
</TABLE>
* Signature affixed by Elinor W. Gammon pursuant to power of attorney
dated September 12, 2000 and incorporated by reference from Exhibit 16
to Post-Effective Amendment No. 9 to the Registration Statement on Form
N-1A of PaineWebber PACE Select Advisors Trust, SEC File 33-87254,
filed September 29, 2000.
** Signature affixed by Elinor W. Gammon pursuant to power of attorney
dated November 13, 2000 and incorporated by reference from Exhibit
16(b) to Registrant's Registration Statement on Form N-14, SEC File No.
333-50238, filed November 17, 2000.
<PAGE>
PAINEWEBBER PACE SELECT ADVISORS TRUST
EXHIBIT INDEX
-------------
Exhibit
Number
------
(1) (a) Certificate of Business Trust effective September 9, 1994 1/
-
(b) Amended and Restated Trust Instrument 2/
-
(2) Amended and Restated By-Laws 2/
-
(3) Copies of any voting trust agreement - none
(4) A copy of the Agreement and Plan of Reorganization and Termination is
included in the Combined Proxy Statement/Prospectus as Appendix A
thereto and incorporated by reference.
(5) Instruments defining the rights of holders of Registrant's shares of
beneficial interest 3/
-
(6) (a) Investment Management and Administration Agreement 4/
-
(b) Sub-Advisory Agreement with Pacific Investment Management Company
LLC with respect to PACE Government Securities Fixed Income
Investments dated as of October 10, 2000 2/
-
(c) Sub-Advisory Agreement with Metropolitan West Asset Management
LLC with respect to PACE Intermediate Fixed Income Investments
dated as of October 10, 2000 2/
-
(d) Sub-Advisory Agreement with Pacific Investment Management Company
LLC with respect to PACE Strategic Fixed Income Investments dated
as of May 5, 2000 2/
-
(e) Sub-Advisory Agreement with Standish, Ayer & Wood, Inc. with
respect to PACE Municipal Fixed Income Investments dated as of
October 10, 2000 2/
-
(f) Sub-Advisory Agreement with Rogge Global Partners plc with
respect to PACE Global Fixed Income Investments dated as of
October 10, 2000 2/
-
(g) Sub-Advisory Agreement with Fischer Francis Trees & Watts, Inc.
with respect to PACE Global Fixed Income Investments dated as of
October 10, 2000 2/
-
(h) Sub-Advisory Agreement with State Street Global Advisors with
respect to PACE Large Company Value Equity Investments dated as
of October 10, 2000 2/
-
(i) Sub-Advisory Agreement with Institutional Capital Corporation
with respect to PACE Large Company Value Equity Investments dated
as of July 1, 2000 2/
-
(j) Sub-Advisory Agreement with Westwood Management Corporation with
respect to PACE Large Company Value Equity Investments dated as
of July 1, 2000 2/
-
(k) Sub-Advisory Agreement with Alliance Capital Management L.P. with
respect to PACE Large Company Growth Equity Investments dated as
of October 10, 2000 2/
-
(l) Sub-Advisory Agreement with State Street Global Advisors with
respect to PACE Large Company Growth Equity Investments dated as
of October 10, 2000 2/
-
<PAGE>
(m) Sub-Advisory Agreement with Ariel Capital Management, Inc. with
respect to PACE Small/Medium Company Value Equity Investments
dated as of October 4, 1999 1/
-
(n) Sub-Advisory Agreement with ICM Asset Management, Inc. with
respect to PACE Small/Medium Company Value Equity Investments
dated as of October 10, 2000 2/
-
(o) Sub-Advisory Agreement with Delaware Management Company with
respect to PACE Small/Medium Company Growth Equity Investments
dated as of December 16, 1996 5/
-
(p) Sub-Advisory Agreement with Martin Currie Inc. with respect to
PACE International Equity Investments dated as of October 10,
2000 6/
-
(q) Sub-Advisory Agreement with Schroder Investment Management North
America Inc. with respect to PACE International Emerging Markets
Equity Investments dated as of June 15, 1995 4/
-
(7) (a) Distribution Contract 2/
-
(b) Dealer Agreement 2/
-
(8) Bonus, profit sharing or pension plans - none
(9) Custodian Agreement 1/
-
(10) Plan pursuant to Rule 12b-1
(a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
A shares 2/
-
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
B shares 2/
-
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class
C shares 2/
-
(d) Plan pursuant to Rule 18f-3 7/
-
(11) Opinion and consent of Counsel on legality of shares (filed herewith)
(12) Opinion and consent of Counsel on tax matters (to be filed)
(13) Transfer Agency Agreement 8/
-
(14) Auditors' consent (filed herewith)
(15) Financial Statements omitted from prospectus - none
(16) (a) Powers of Attorney for Ms. Alexander and Messrs. Beaubien, Bewkes,
Hewitt, Janklow, White and Woodward 9/
-
(b) Power of Attorney for Mr. Storms 10/
--
(17) Additional Exhibits - none
_______________
1/ Incorporated by reference from Post-Effective Amendment No. 8 to
-
registration statement, SEC File No. 33-87254, filed December 1, 1999.
<PAGE>
2/ Incorporated by reference from Registrant's N-14 registration statement,
-
SEC File No. 333-49052, filed November 1, 2000.
3/ Incorporated by reference from Articles IV, VI, IX and X of Registrant's
-
Trust Instrument and from Articles V and IX of Registrant's By-Laws.
4/ Incorporated by reference from Post-Effective Amendment No. 1 to
-
registration statement, SEC File No. 33-87254, filed February 23, 1996.
5/ Incorporated by reference from Post-Effective Amendment No. 4 to
-
registration statement, SEC File No. 33-87254, filed November 13, 1997.
6/ Incorporated by reference from Post-Effective Amendment No. 10 to
-
registration statement, SEC File No. 33-87254, filed November 9, 2000.
7/ Incorporated by reference from Registrant's N-14 registration statement,
-
SEC File No. 333-49850, filed November 13, 2000.
8/ Incorporated by reference from Post-Effective Amendment No. 2 to
-
registration statement, SEC File No. 33-87254, filed October 16, 1996.
9/ Incorporated by reference from Post-Effective Amendment No. 9 to
-
registration statement, SEC File No. 33-87254, filed September 29, 2000.
10/ Incorporated by reference from Registrant's N-14 registration statement,
--
SEC File No. 333-50238, filed November 17, 2000.
